what is implied fx?

Answer 1

I suspect that you mean 'implied FX forward rate" or "Implied FX spot rate."

If given one rate, you should be able to compute the other.

For example, you might be given a spot rate -- which is the current exchange rate. Then you might be asked what the forward rate is for an exchange of money in three months. Think about how we could replicate an exchange od dollars for, say euros, in three months. We coul enter into a forward contract to do the exchange at an agreed upon price. Or we could borrow dollars now to be paid back in three months, take those dollars & exchange them for euros. Then we could invest them for three months.

If we do that, then the dollars we pay will be the amount we borrowed plus the domestic interest -- and the euros we get will be the number of euros we exchange plus the foreign interest.

If we divide one by the other, we get the implied FX rate for the future date. It should match the forwardprice of the contract.