Rollover Rate
A rollover rate is the interest rate charged or earned for holding a currency or security for an extended period of time. It is also known as the swap rate or overnight rate. The rollover rate is determined by the difference between the interest rates of two currencies in a currency pair. When a currency pair is held for more than one day, the rollover rate is applied to the position.
History of the Term
The concept of rollover rate has been around since the early days of currency trading. In the past, traders would rollover their positions from one day to the next, earning or paying a small amount of interest depending on the interest rate differential between the two currencies. This concept has been adopted by modern day traders and is now a common practice in the forex market.
Comparison Table
| Currency Pair | Interest Rate Differential | Rollover Rate |
|---|---|---|
| EUR/USD | 0.25% | 0.25% |
| USD/JPY | 0.50% | 0.50% |
| GBP/USD | 0.75% | 0.75% |
Summary
A rollover rate is the interest rate charged or earned for holding a currency or security for an extended period of time. It is determined by the difference between the interest rates of two currencies in a currency pair. Traders can find more information about rollover rates on websites such as Investopedia, Forex.com, and FXCM.
See Also
- Currency Pair
- Interest Rate Differential
- Swap Rate
- Overnight Rate
- Forex Market
- Currency Trading
- Carry Trade
- Margin Trading
- Leverage
- Pip Value
