Japan's Nikkei 225 Climbed 1.3%

Asian Shares End Higher: Tokyo At Highest Level In 4 Months

Asian markets ended broadly higher Monday, with Shanghai leading the advance and Japan's Nikkei 225 ending at its highest level in four months.

Shanghai's market saw support following comments from Premier Wen Jiabao over the weekend which indicated that his government will not rush to unwind its stimulus policies. Weakness in the yen and stronger-then-expected industrial output data helped lift Japanese stocks.

Japan's Nikkei 225 climbed 1.3% to 10634.23, posting its strongest closing level since late August. China's Shanghai Composite finished up 1.5% and South Korea's Kospi Composite added 0.2%, while Hong Kong's Hang Seng Index shed 0.2% by the close.

Markets in Australia, New Zealand and India were closed for local holidays."We expect to continue to see demand for risky assets this week as markets are positioning themselves for 2010," Dariusz Kowalczyk, chief investment strategist at SJS Markets said in a research note issued Monday. "We anticipate gains in equities, commodities, corporate credit and emerging market assets, which should continue through (the first quarter of 2010)".

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How Does This Affect Your FX Trading Account?

If you are long the currency bearing the higher interest rate then you should earn interest, automatically credited to your trading account. Conversely, if you are short the currency bearing the higher interest rate then you should experience a small debit to your account.

Be aware that most foreign exchange brokers require a 2% margin set for your account in order to receive interest. If not, you will have to pay for the rollover, it doesn't matter whether you are long or short the currency bearing the higher interest rate .

Day Traders

For day traders, who almost never hold any overnight positions, the rollover is not applicable because there are no positions to roll, and therefore no interest is earned or paid.

Swing Traders

If you are a swing, position or long term trader, the rollover will affect your account since you'll earn or pay interest on a daily basis. Therefore, it is recommend setting your account at 2% margin and only trying to long the currency bearing the higher interest rate.

A strategy for the longer term trader is the carry trade, which relies on a big interest rate differential between the two traded currencies.

FX Market Daily Interest Rollover

In the spot Foreign exchange market, trades settle in two business days and open trading positions held at time of rollover are automatically rolled over by the fx broker to the next settlement date, the open trade position is swapped for a new position expiring the following settlement date at 5pm EST rollover.

This is also known as "tomorrow, next day" or simply "tom next."

For example, if you buy 200,000 Euros on Monday, you must deliver 200,000 Euros on Wednesday.

On Wednesdays, the amount added or subtracted to an account as a result of rolling over a position tends to be around three times the usual amount.

This "3-Day" rollover accounts for settlement of trades through the weekend period.