Hello
I would like to get an explanation of the following.
If a person buys a currency pair - say usd/euro- does this
mean the person is long in euros and if the euro has a
higher interest rate you get paid the interest on the
trade? Also, if you sell the same pair does it mean you
are short the euro and you would have to pay interest
on the trade?
thanks alot
jase
You’d be correct.
It’s EUR/USD, the Euro is the base currency & USD is the quote
currency. The euro interest rate is 3.25%, the USD interest rate is
1% so therefore if you are long Eur, (short USD) the swap or
carry or overnight interest rate should be positive 2.25%. (-2,25%
if you are short Eur (long USD).
But each broker has a different answer to this question, there is
also a spread in the swap, so you could end up paying for both
long & short.
Check your broker for their fees etc.