Rollover Interest Guide — Forex Swap Rates and Carry Trades
Rollover interest (swap rate) is the interest paid or earned for holding a forex position overnight. It is calculated from the interest rate differential between the two currencies in the pair and can significantly affect trading profitability.
Every forex trade involves borrowing one currency to buy another. When you hold a position past the daily settlement time (5 PM EST), you earn or pay interest based on the interest rate differential. If you buy a currency with a higher interest rate and sell one with a lower rate, you earn positive carry. If the opposite, you pay negative carry. For example, buying AUD/JPY when the RBA rate is 4.35% and the BoJ rate is 0.50% gives a +3.85% annualized rollover credit. The carry is adjusted for broker markup and market conditions.
Triple swap Wednesday is a key concept: because forex settles T+2, holding a position through Wednesday 5 PM EST incurs three days of rollover interest (including the weekend). This means Wednesday's swap is 3x the standard rate. Traders should check the swap calendar — some brokers apply triple swap on Friday for certain pairs. Swap rates are quoted in pips or account currency per standard lot per day. A typical positive carry trade might earn $5-15 per standard lot per day. Over a year, this adds up significantly. The carry trade strategy — buying high-yield currencies and selling low-yield ones — is one of the oldest forex strategies. However, carry trades carry exchange rate risk — the high-yield currency can depreciate, wiping out accumulated interest. In 2008, the yen carry trade unwind caused massive losses.
Managing Rollover Costs
Check swap rates before opening positions — most brokers publish end-of-day swap rates. Avoid holding high-negative-carry positions over Wednesday's triple swap. Consider rollover costs in your trading plan: a scalper who closes all positions before 5 PM avoids swap entirely. Swing traders and position traders must account for cumulative swap costs that can add up to 10-20 pips per week. Some brokers offer Islamic (swap-free) accounts that do not charge rollover interest, in compliance with Sharia law. Hedge rollover exposure by adjusting position size for high-carry pairs. Use swap rate calculators to compare costs across brokers — swap rates vary significantly between brokers.
FAQs
Is rollover interest paid every day?
Rollover interest is applied every day the position is held past 5 PM EST. Wednesday's rollover is triple to account for Saturday and Sunday settlement. Some brokers may apply triple rollover on Friday instead — check your broker's policy. Holiday periods may have adjusted rollover schedules.
How is rollover interest calculated?
Rollover = (interest rate differential / 365) x notional value, adjusted for broker markup. For a standard lot of AUD/JPY (100,000 AUD), with a 3.85% rate differential: (0.0385 / 365) x 100,000 = approximately 10.55 AUD equivalent per day in JPY. Brokers display swap rates in points or account currency directly on their trading platforms.
What is the carry trade in forex?
The carry trade involves buying a currency with a high interest rate and selling a currency with a low interest rate to earn the interest rate differential (positive carry). The classic trade was buying AUD/JPY or NZD/JPY when Australian and New Zealand rates were 5-7% and Japanese rates were near zero. Carry trades are most profitable in stable or trending markets where the exchange rate does not move against the position.