Spot Rate
The current market price for immediate delivery and settlement of a currency, commodity, or security.
What is Spot Rate?
The spot rate is the current exchange rate or price at which a currency, commodity, or financial instrument can be bought or sold for immediate delivery, typically settled within two business days (T+2) in currency markets. It reflects real-time supply and demand. Spot rates are quoted as bid (the price a dealer will buy) and ask (the price a dealer will sell), with the difference being the spread. In foreign exchange, the spot rate is the most commonly referenced rate and forms the foundation from which forward rates and futures prices are derived using interest rate differentials. In bond markets, spot rates are zero-coupon yields used to discount individual cash flows.
Example
If the EUR/USD spot rate is 1.0850, a company can sell €1 million today and receive $1,085,000 within two business days. If the company instead wants to lock in a rate for delivery in three months, it would use the forward rate, which reflects the current spot rate adjusted for the interest rate differential between the US and eurozone over the three-month period.