Premium in the currency market refers to the number of pips added to the spot price by judging the forward or futures price.

This is the case when the "quoted currency rate" is smaller than the "quoted currency rate". In this case, the Swap Rate is a positive number. In this case, the exchange rate points are arranged in a way that the left is small and the right is large.

Premium indicates that the forward rate is higher than the spot rate. Under the direct markup method, an appreciation represents a depreciation of the local currency. Conversely, under the indirect markup method, an appreciation represents an appreciation of the local currency.

For example, if the spot exchange rate of RMB to USD is USD 100 = RMB 810.02, if the forward exchange rate appreciates by 10 points, the forward exchange rate is USD 100 = RMB 810.12, which means the RMB depreciates by 10 points. And vice versa.

Take USD/CHF as an example

If the price of USD/CHF is 1.6610/20, and the two-way rate for the three-month USD is 2.25%, -2.50%. The two-way rate for the three-month CHF is 3.75%, -5.00%.

1. When selling USD and buying CHF, the overnight exchange points are calculated as follows:

1.6610 x (3.75%-2.5%) x 1 day/360 days = 0.000058

That is, 0.58 basic points (Pips).

2. When buying USD and selling CHF, the overnight exchange points are calculated as follows:

1.6620 × (5.00% - 2.25%) × 1 day / 360 days = 0.000127

That is, 1.27 basic pips.

This gives USD/CHF overnight exchange pips of 0.58/1.27 basic pips.