Inside the Currency Market: Mechanics, Valuation, and Strategies

Swap Points and Rollover

Swap points, or forward points, are the bid/ask prices of forward contracts traded in the interbank market and must be viewed as an interest rate. But foreign exhange (FX) swaps, particularly interest rate swaps, also incorporate swap points in their terminology and trade in the interbank market. The formal definition of swap points is the difference between interest rates on currencies. All currency pairs have different swap rates due to the differences in interest rates between pairs. Swap points are also termed forward points, FX points, or spot points. Positive forward points are added to the spot rate while negative points are deducted. Forward points equate to basis points by multiplying by 100 or 1000. If a swap ...