Forex Competitive Rollover Rates FOREX.com

What am I missing? A (flawed) strategy on using interest rate differences and forex hedging?

I just can't figure out what's the catch. I must be missing something crucial, but I just don't see what.
Let's say I have savings in US dollars. (Alternatively, I can borrow USD at really low rates.)
Then, I can deposit money in a foreign bank account with insurance in a foreign currency. All legal and in solid banks.
Let's assume some currency of a developing country. High volatility, moderate to low political risks, high interest rates. (There are several such currencies I have in mind to diversify. I'm not talking about political risks at the moment, but I am aware of such.)
Let's say that such deposit would yield me 10% per year in that foreign currency.
The problem is of course the risk of that foreign currency losing value faster than the interest rate I'm getting paid in the currency.
If after the first year I get 10% more but that currency is devalued by 20% compared to USD, then I would end up with less dollars when converted back to US dollars.
To address that, I would simultaneously open a long position for USD/XXX with a forex broker (I would in effect sell back that XXX currency and buy USD, for as long as the position remains open.)
So, I would take US dollars, convert them to currency XXX, deposit at a foreign bank at high interest rate.
At the same time, I would go long for the same amount (notationally) of XXX. I would use little leverage to make sure I don't get a margin call. Part of the available US dollar savings would be used for that.
The lot size of USD/XXX would match what I would deposit in a foreign bank in XXX.
If XXX goes up compared to USD, then my long position loses me money, but I make it back when converting that foreign deposit back to USD.
If XXX goes down, then my bank deposit would be worth less, but I would make money on my long position.
There is roll cost and conversion spread (both for the trade and for the deposit) and there are political risks and there is still a risk of a margin call, if leverage is greater than one.
But theoretically, I could even do with without leverage.
If I have, say, $200k. Then I would set aside $100k (plus the maintenance) for the forex broker. And would open a lot for that amount (minus the maintenance), and would convert a matching amount to XXX and then would deposit XXX.
The way I look at it, I would effectively be getting 10% interest in USD. Well, that would be 10% minus the associated costs. But the costs could still be less than 10%.
And risks as really limited only to political risks. I wouldn't invest in a country that's at war. But there are plenty of developing countries that pay 10%+ on deposits in their currencies.
But must be missing something. It can't be that simple.
So what am I missing?
Would the rollover completely kill any profit margin?
submitted by Aero72 to investing [link] [comments]

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Rollover or swap rate is the interest paid or earned for holding a Forex position overnight. Each currency has its own interest rate, and as trading is done in pairs, every trade involves not only two different currencies, but also their two different interest rates. If the interest on the bought currency is higher than the interest rate of the sold currency, then a trader earns rollover ... Most forex exchanges display the rollover rate, meaning calculation of the rate is generally not required. But consider the NZDUSD currency pair, where you’re long NZD and short USD. The ... To account for that, the forex market books three days’ worth of rollover interest on Wednesdays. Using the AUDUSD example above, a trader that held that trade on Wednesday at 5pm ET would incur ... Rollover rates displayed are based on a 10K position and estimated based on the previous rollover rate and number of days being rolled. For example, typically Wednesdays are rolled for three days to account for the weekend. Rollovers also may vary due to month end or holidays. There is no rollover rate on holidays. To account for that, Forex brokers charge an extra rollover two (2) business days before the holiday. If that day is Wednesday, then that means four (4) days worth of interest on a single day. Key Points: The Rollover Rate is paid at midnight according to each broker’s time server; At Wednesday the ... In forex, rollover is calculated for application to an investor's trading account Monday through Friday at 5 p.m. Eastern Standard Time. On weekends, the forex market is closed for business, but rollover values are still being counted. Typically, forex books an interest amount equal to three days of rollover on Wednesdays. Holidays during which the forex market is closed still provide a ... CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose ... I understand that residents of the US are not eligible to apply for an account with this FOREX.com offering, but I would like to continue. Continue or. Go to Content for My Region. I’d like to view FOREX.com’s products and services that are most suitable ...

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