Swap

Spot forex trades nominally settle two business days after the trade date. When a position is held past the broker's daily rollover time (typically 5 pm New York), it is automatically rolled forward to the next settlement date. The financial consequence of this roll is the swap: a charge or credit based on the interest-rate differential between the two currencies in the pair. Holding a currency with a higher interest rate long against one with a lower rate earns positive swap; the reverse incurs a negative swap charge.

Swap rates are expressed per lot per night and published by brokers in their contract specifications. They are not constant - brokers adjust their swap tables periodically as interbank overnight rates shift, and the rates include the broker's own markup above the raw interbank carry rate. On Wednesdays, most brokers apply a triple swap (three nights' worth) to cover the weekend settlement dates, which means positions closed before rollover on Thursday avoid the triple charge.

For position traders and carry traders who hold positions for days or weeks, swap can meaningfully contribute to - or erode - overall trade profitability. AUD/JPY and NZD/JPY have historically been popular carry trade pairs because the rate differential between the high-yielding antipodean currencies and the near-zero yen rate generated positive swap for long positions. Islamic accounts replace variable swap with a fixed administration fee charged after a specified number of nights, satisfying Sharia restrictions on interest. Traders should compare swap rates across brokers when running any position-trading or carry strategy.