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. Rollover Risk

    A risk associated with the refinancing of debt. Rollover risk ...
  6. Funding Currency

    The currency being exchanged in a currency carry trade. A funding ...
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. Professionals

    Rollovers

    Rollovers
  4. Mutual Funds & ETFs

    Making Ineligible Rollovers to Your IRAs

    Don't let these common mistakes put a crack your nest egg.
  5. 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.
  6. Retirement

    Avoid the Most Common IRA Rollover Mistakes

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

    Avoid These Common IRA Rollover Mistakes

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

    FXCM Capital Markets; Commission Structure

    Commission Structure On Standard and Micro accounts, FXCM does not charge a commission on trades. Rather, the firm makes a profit by marking up the spread which traders must pay. In order to ...
  9. Professionals

    Rollover Vs. Transfer

    An individual may want or need to move their IRA from one custodian to another. There are two ways by which this can be accomplished. An individual may rollover their IRA or they may transfer ...
  10. 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 ...
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. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center