Rollover Rate (Forex)

DEFINITION of 'Rollover Rate (Forex)'

The net interest return on a currency position held by a trader. The rollover rate converts net currency interest rates, which are given as a percentage, into a cash return for the position. Since a trader is long one currency and short another, the net effect of both interest rates has to be calculated.


In forex, a rollover means that a position is extended at the end of the trading day without settling.

BREAKING DOWN 'Rollover Rate (Forex)'

For example, an investor has a long 100,000 EUR/USD at a rate of 1.3000. The EUR interest rate is 2%, or a daily rate of 0.0054%, and the USD is 3% or a daily rate of 0.0081%.


The interest on the EUR is (100,000 * 0.0054%) 5.40 EUR; the USD costs (130,000 * 0.0081%) 10.53 USD. Converting the EUR to USD, 5.40 * 1.3000 = USD 7.02. The net USD amount is 7.02 - 10.53 = - 3.51, which is divided by the 100,000 position. On a long EUR/USD position, the rollover costs 0.00003562, or 0.3562 pips.

RELATED TERMS
  1. Rollover Credit

    Interest paid to a forex trader who holds a position overnight. ...
  2. Rollover

    A rollover is when you do the following: 1. Reinvest funds from ...
  3. Rollover Debit

    In foreign exchange trading, a loss caused by an unfavorable ...
  4. Rollover IRA

    A special type of traditional individual retirement account into ...
  5. Net Long

    A condition in which an investor has more long positions than ...
  6. Rollover Mortgage

    A mortgage in which the unpaid balance (outstanding principal) ...
Related Articles
  1. Forex Education

    Understanding Forex Rollover Credits And Debits

    Forex trades are subject to receiving interest or being debited interest if positions are held overnight.
  2. Investing Basics

    What Happens in a Rollover?

    In the retirement savings realm, rollover refers to transferring the holdings in one retirement account into another.
  3. Retirement

    Best Ways to Roll Over Your 401(k)

    When you leave a job, you have some decisions to make about what to do with your 401(k). Here are some choices.
  4. Retirement

    Avoid the Most Common IRA Rollover Mistakes

    Avoid paying excess taxes by learning some simple transfer rules.
  5. Retirement

    Avoid These Common IRA Rollover Mistakes

    Rolling over an IRA can lead to higher returns and other perks; but avoid these common mistakes.
  6. Forex Education

    How Leverage Is Used In Forex Trading

    Forex trading by retail investors has grown by leaps and bounds in recent years, thanks to the proliferation of online trading platforms and the availability of cheap credit. The use of leverage ...
  7. Investing News

    Is The EUR Headed Back Below 1.10?

    The weakening U.S. Dollar over the past two months has caused a retreat from the short EUR/USD trade that had been a popular strategy for investors since the ECB ramped up its policy of aggressive ...
  8. Forex Education

    Understanding The Spread in Retail Currency Exchange Rates

    Understanding how exchange rates are calculated and shopping around for the best rates may mitigate the effect of wide spreads in the retail forex market.
  9. Forex Education

    Forex Trading: A Beginner's Guide

    Learn about the forex market and some beginner trading strategies to get started.
  10. Forex Strategies

    The Money Market Hedge: How It Works

    Investopedia explains how to hedge foreign exchange risk using the money market, the financial market in which highly liquid and short-term instruments like Treasury bills, bankers’ acceptances ...
RELATED FAQS
  1. How is rollover interest calculated?

    In the forex market, all trades must be settled in two business days. Traders who want to extend their positions without ... Read Answer >>
  2. What does rollover mean in the context of the forex market?

    In the forex (FX) market, rollover is the process of extending the settlement date of an open position. In most currency ... Read Answer >>
  3. What is a 401(k) rollover?

    Find out what a 401(k) rollover is, when you might want to roll over a 401(k) and whether a direct or indirect rollover is ... Read Answer >>
  4. Why can't I have fixed rollover costs in forex?

    In the forex market, trades are made on many foreign currencies around the world. Much like in the equities market, in the ... Read Answer >>
  5. Are 401(k) rollovers taxable?

    Learn what parts are eligible for 401(k) rollover, the tax impact of a direct rollover or manual rollover, and the time limit ... Read Answer >>
  6. Why do forex traders use a currency converter?

    All currencies are quoted in pairs - one country's currency against another country's currency. A currency converter is used ... Read Answer >>
Hot Definitions
  1. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  2. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  3. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  4. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  5. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  6. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
Trading Center