Interest

In forex, “interest” refers to the concept of “swap” or “rollover.” Swap is a swap transaction based on the difference in interest rates between a currency pair.

In the forex market, each currency has a specific interest rate. Interest rates are associated with each country’s monetary policies and economic conditions. The difference in interest rates leads to interest income or cost for investors in the forex market.

The swap transaction occurs when an investor carries over a closing position at the end of the day to the next day in a currency pair. If an investor buys a currency with a high-interest rate and sells a currency with a low-interest rate, they will receive a positive swap amount in their account. In this case, the investor earns interest income for the position they carry over.

However, if an investor buys a currency with a low-interest rate and sells a currency with a high-interest rate, they will be charged a negative swap amount in their account. In this case, the investor incurs interest costs for the position they carry over.

Swap rates are determined by forex brokers and can vary depending on market conditions and liquidity. Swap rates are calculated daily and reflected in the investor’s account.

Swap is an important factor in the forex market because it can be an additional cost or income source for investors. Swap rates should be taken into account by investors when calculating costs or income for carrying over long-term positions.

However, swap rates are not only influenced by interest rates. Other factors can also affect swap rates, such as central bank policies, economic data, political events, or market liquidity.

Swap transactions are particularly relevant for investors who carry over long-term positions. Short-term traders often close their positions on the same day to avoid swap costs, while long-term investors may carry over their positions to earn swap income.

In conclusion, in forex, “interest” or “swap” refers to a swap transaction based on the difference in interest rates between a currency pair. Swap can be an additional cost or income source for investors and is particularly relevant for long-term positions. Swap rates can vary depending on market conditions, liquidity, and other factors.