Yield
The income return on an investment, typically expressed as an annual percentage based on cost or current value.
Quick answer
Yield is the income an investment generates, expressed as a percentage. In forex, yield differences between currencies drive swap rates and carry flows.
Definition
Yield is the income generated by an investment, expressed as a percentage. In forex, yield differences between currencies (interest rate differential) drive swap rates and can influence currency values. Higher-yielding currencies often attract capital.
How It Works
- Bond yield: annual interest / bond price
- Forex: interest rate differential between currencies
- High yield currency: positive swap when long
- Carry trade: borrow low yield, buy high yield
Trading Tips
1
Check swap rates before holding positions overnight
2
Yield differentials can support currency trends
3
Central bank rate decisions affect yields
Related Terms
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