Normally, when you enter a Forex position and leave it open through the end of the US trading session, you have to pay an overnight rollover fee (which is also called swap). Sometimes, depending on the difference of the interest rates between the currencies in a pair, this fee is paid to you. Some traders even use such positive difference to earn a consistent carry trade income.
Forex brokers skew the swap amount paid in buy and sell directions on a currency pair, so that the result is negative for trader. For example, if you go both long and short on EUR/USD, the chances are that you will be losing money on swaps. Some brokers do not charge or pay swaps at all — either due to religious and regulatory restrictions or due to their marketing policy.
My personal experience with swaps is a rather positive one. Because of several EUR/CHF carry trade positions I hold from September 2011, my overnight interest rate balance is well above zero. Of course, if not for those positions, it would have been slightly negative — just because brokers tend to charge more than they pay for keeping the same currency pair overnight. And what is your experience with overnight interest rates?
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If you happen to have any questions or if you wish to share some details regarding your experience with overnight interest rates in FX trading, please feel free to share with us using the form below.
