End of year FX swap rates - significant moves currently likely
Entry posted by JamesIG
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Please be aware that due to year end market factors we are seeing significant moves in the funding rates for most FX pairs. This has been observed across the market, although some pairs are looking to be worse affected than others (most notably if you are short US dollars). These factors include financial institutions balancing their books before the end of the year, putting a strain on certain currencies.
You can see overnight funding charges on FX pairs by using the link to the right. This is currently only available in desktop/web trading platform for leverage accounts.
What does this mean for you
Funding rates for FX pairs can be extremely volatile, resulting in your daily funding adjustments being much higher than normal. To the best of our knowledge this will affect JPY crosses held past 10pm on the 26th December, CAD crosses and USDTRY positions held past 10pm on the 28th December, and most other pairs including gold and silver held past 10pm on the 27th December.
As an example, for a normal 2-day roll charge on EURUSD you would receive 1.7pts for a short position and pay 1.79pts for a long position (+/- IG’s admin charge). Current rates are indicating receiving/paying 6 times these amounts should you hold your positions through year end snapshot dates, but these rates can change.
All things being equal, the FX tradeable price should adjust to reflect these rates but this is out of our control.
Where can I see expected overnight funding rates on FX positions?
The funding rates shown on the platform are indicative and subject to change. 'Swap Bid' / 'Swap Offer' rates as shown below can be toggled on/off and show the expected rate for that day. I.e, to view what the expected rates you'll pay or receive on a currency pair at 10pm (GMT) would require you to check the specific currency row at any point on that same day (prior to 10pm). You can read more about that here.
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