Problems in countries with high swap rates
Selling low interest rate currencies and buying high interest rate currencies is the basis for getting swap interest rates. As long as national interest rates do not change, swap points will not change significantly. This is because swap points are generated by the interest rate difference. We mostly sell Japanese yen and buy foreign currencies, so if the interest rate on the Japanese yen goes up, the swap interest rate on any currency will go down. Even if you use swap points to calculate a certain annual interest rate, if the interest rate difference between Japan and other countries changes due to a sudden increase in interest rates, the future plan will change. Also, if you only need a high interest rate currency, that doesn’t work. Countries with high interest rates have reasons for high interest rates. Besides high growth potential, there are other reasons for higher interest rates. It is possible that the country has a high country risk, which indicates the degree of risk of the speculative country, and the currency has a high inflation rate and the actual monetary value is declining. In a country with high inflation, the monetary value itself tends to decline, so there is a risk that the yen will inevitably rise and losses will increase. In addition, even with high interest rate currencies, if the total amount of money circulating in the market is small, the exchange rate will fluctuate with a little bit. In other words, exchange rate fluctuations are rather small, and we must look for a stable currency. In Forex, if you have foreign currency, you can get swap points every day without doing anything, but let’s manage the minimum risk. Then, let’s think about the concept of operation, what you want to increase this swap point for, and how much you want to make in the end.