is a foreign exchange transaction in which the customer, at the time sold Currency forex spread A and bought Currency B, buys the forward Currency A and sells the forward Currency B in converse directions. Lets say you want to buy audusd. This significantly reduces their risk. In order to collect or pay any overnight interest due on these foreign balances, at the end of every day institutions will close out any foreign balances and re-institute them for the following day. The reason why you are charged a triple rollover on Wednesdays is because no rollovers are applied for positions held over the weekend (Saturdays and Sundays).
In currency exchange rates.
This makes forex swaps very useful for multinational and exporting companies.
They are also frequently used for speculative trading, typically by combining two offsetting positions with different original maturities. Likewise, when you buy a currency with lower interest rate and sell a currency with higher interest rate, you are charged a negative swap. During the contract term, A receives EUR 3M Libor from, and pays USD 3M Libor to, B every three months, where is the price of the basis swap, agreed upon by the counterparties at the start of the contract. Of course, brokers who offer CFDs also levy swap rates. Example: A British Company may be long EUR from tron kryptowährung sales in Europe but operate primarily in Britain using GBP. The swap rates are determined by the rate the liquidity providers are willing to pay and thus could differ from the actual rates. Pricing edit, main article: Interest rate parity, the relationship between spot and forward is known as the interest rate parity, which states that FS(1rdT1rfT displaystyle FSleft(frac 1r_dcdot T1r_fcdot Tright where F forward rate S spot rate rd simple interest rate of the term currency.