Why Do Forex Overnight Rates Have Positive and Negative Values?
2023-06-05
Summary:
Explore the dynamic values of Forex overnight rates and their trading impact on EBC's informative website. Depend on the forex platform you choose.
In the forex market, buying and selling are currency pairs, and there are no issues with storage and preservation of goods. Therefore, the inventory fee in the forex market actually refers to the cost of forex holdings, which is overnight interest. Overnight interest is the interest paid or earned by holding a position overnight. Each currency has its own interest rate.
Is it normal for investors to notice positive and negative overnight interest rates?
It is normal for overnight interest rates to be positive or negative, as this is due to the different interest rates of different currencies in the forex market. When conducting forex trading, if you hold a high interest rate currency pair (such as AUD/JPY), you can receive overnight interest income; If you hold a low interest rate currency pair (such as euros/dollars), you will need to pay overnight interest fees.
For example, if you hold a long position in AUD/JPY and the current overnight interest rates are 0.5% and -0.1%, you may receive an overnight interest income of approximately $3.3 per day (calculation formula: 100000*3.5%/365=9.59), or an overnight interest fee of approximately $1.6 per day (calculation formula: 100000 * -0.1%/365=-0.27).
Therefore, it is a normal phenomenon in the forex market to have positive and negative overnight interest rates, which reflects the differences in interest rates between different national currencies. Traders need to choose a suitable currency pair and holding time based on their trading strategy and risk tolerance, in order to maximize returns or reduce costs.
【 EBC Platform Risk Reminder and Disclaimer 】: There are risks in the market, and investment needs to be cautious. This article does not constitute investment advice.
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