(a) today, say I did a fx swap trade: long PHP/USD spot and short 1m PHP/USD forward. Then if 1m PHP interest rate goes up, I should make money (meaning i locked in paying a lower 1m PHP interest rate today).

(b) But on the other hand, I long PHP/USD spot and short 1m PHP/USD forward, meaning I borrow USD today and should be pay USD rate and earning PHP interest rate.

Why in (a) it is showing I am paying PHP rate, while in (b) showing I am earning PHP rate. What goes wrong here?


  • $\begingroup$ I don't understand your question, in (a) you borrow PHP and lend USD, in (b) you borrow USD and lend PHP. Are you buying PHP or buying USD spot? $\endgroup$ – Lliane Apr 17 '20 at 7:18
  • $\begingroup$ In both cases, I buy PHP spot, short PHP forward $\endgroup$ – tennisboy Apr 17 '20 at 7:25
  • 2
    $\begingroup$ ok I understand now, these are different rates, you borrow with the 1 month term rate, then if you keep the PHP balance you will receive the overnight PHP rate and pay the overnight USD rate. $\endgroup$ – Lliane Apr 17 '20 at 7:33

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