FX Fundamental

SWAP CHARGES

Definition


It is an interest rate that you pay or get by holding currency.

You know in FX trading, there is hold of two currencies simultaneously, being an exchanger; one is buying and another one is selling if u hold your trade for the next day you owe to pay or receive the interest.

Though it is a very pitty amount if you intend to hold for a longer period of time yet it will matter.

Central Bank Charges Interest Rate


Furthermore, you probably know that every central bank charges interest. For example, (hypothetically pretended ) Bank of England has a 0.1percent interest rate. Consequently, it is referred annual interest rate charged by central bank. And USA (United state dollar )has 0.3 if you hold GBP/USD.

Mean buying it in; other words you buying British pound and selling USA dollar now for holding British pound. You get owe o.1percent (annual) interest because you hold this currency.

On the contrary, you sold the USA dollar thus you have to charge interest rate 0.3% annually which is bigger than the GBP thus high probability you get to charge after the difference.


Above all, You can Google by knowing which currency has a higher rate while typing a swap calculator.
I hope the above-said information will help you with a better understanding of SWAP CHARGES.