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Rollover, also known as Swap or Overnight Fee, is an interest paid or earned as a result of holding a position open overnight on a Derivative.

HF Markets Rollover Policy is aimed to establish and maintain a fair fee across all the tradable securities and asset classes.

Throughout most of the available securities, apart from Forex and Gold, the rollover fee constitutes of an internal interest fee plus or minus the rollover fee HotForex gathers from the counterparties they collaborate with for that respective security.

For the remaining instruments, due to their volatility, the final fee also takes into account an internal market and risk analysis conducted by the company.

Rollover fees are assessed on a continuous basis and amended when needed.

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How do interest rates related to the economy?

Interest rates play an important role in overall economic activity and national development. Changing interest rates by the central bank of the country will affect the investment and asset markets and other commodities related to financial markets.

Let’s see why the central bank changes interest rates.

When the economy is growing rapidly

This means that businesses have low profits and unemployment and are recording increased consumer activity. This means that businesses are recording profits, low unemployment and rising consumer spending. In such cases, the central bank of Japan usually raises short-term interest rates to curb rapid economic growth and inflation risk. Soaring prices, called inflation, are caused by an imbalance between the availability of cash and the goods and services that can be purchased. When interest rates accumulate, banks pay more interest to their customers’ deposit accounts, but borrowing costs rise in contrast.

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When the economy is stagnant

It means that businesses will be in the red, unemployment will rise, and consumers will refrain from spending, creating a bearish market. In this scenario, the central bank seeks to reduce short-term interest rates to make borrowing easier and more affordable. Low interest rates make products and services more affordable for consumers and businesses. This can ultimately drive economic growth and prevent a recession. Recession is caused by the stagnation of consumer activity without consumers using products and services. If interest rates are low, banks will have ample liquidity and borrowing costs will drop significantly.

It is important to remember that central banks are not the only cause of interest rate fluctuations. Certain events, such as geopolitical events, natural disasters, and economic crises, can lead to such fluctuations. For example, the Bank of England lowered interest rates to a record low of 0.25% in 2016 due to sluggish economic activity caused by the Brexit vote.

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Impact of high interest rates

Falling Borrowing Costs
When interest rates are high, loans soar and people refrain from taking out loans. In this scenario, those who choose to take out a loan have to sacrifice most of their income due to high interest rates.
Falling Asset Prices
Lack of disposable income makes consumers less likely to use products and services. Decreased consumer spending leads to a bearish economy due to lack of liquidity in the market.
Low Confidence
Rising interest rates have a negative impact on both consumers and the economy. The liquidity crisis will prevent companies from starting new investments and rolling out products and services.
Increased foreign currencies
Rising interest rates lead to a surge in the local currency to which investment funds are converted, as more foreign investment seeks to take full advantage of high interest rates.

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Impact of low interest rates

Soaring Borrowing Costs
Lower interest rates make loans more affordable and easier to borrow. Lower interest rates make loans more affordable and accessible. This encourages people to take out loans at marginal interest payments, which also means an increase in disposable income.
Soaring Asset Prices
Low interest rates make it easier to buy assets such as homes and cars through financing means. This increases personal property by causing soaring asset prices.
Increased liquidity
Increased disposable income due to low interest rates encourages consumers to use their products and services. This will increase liquidity and ultimately improve the economy.
Decrease in foreign currencies
Low interest rates are unattractive to foreign investors, resulting in a decline in currency value.

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