About interest calculations

EUR/JPY LONG position: You are buying EUR and selling JPY

1. Calculate the borrowing interest of EUR for the duration in seconds and convert to USD = X
2. Calculate the lending interest on JPY for the duration in seconds and convert it to USD = Y

EUR/JPY SHORT position: You are buying JPY and selling EUR

1. Calculate the borrowing interest of JPY for the duration in seconds and convert to USD = X
2. Calculate the lending interest on EUR for the duration in seconds and convert it to USD = Y

Y-X = Interest to be payed or owed (Negative or positive number)
Negative number: Amount owed by OANDA
Positive number: Amount paid by OANDA  

The OANDA Interest Calculation Example

Example:
Client A has a USD base account with OANDA. He buys 1000 units EUR/JPY @ 162.39 on Monday Aug 1, 2008 at 10:00 a.m. and the trade is closed on the same day at 5:45pm.

Interest rates are at:

   

Duration of Trade

• Trade Duration 7hr 45mins, or 27,900 seconds. (31,557,600s in a year)
• 27900 / 31557600 = 0.00088409 yrs

Interest obtained on EUR

• Units x trade durations (in years) x EUR borrowing interest rate (%/year) x FX rate of EURUSD
• 1000 x 0.00088409 x 4.1% x 1.4920 = 0.054082  

Interest Charged in JPY

• units x trade durations (in years) x JPY lending interest rate (%/year) x 1/FX rate of USDJPY
• (1000 x 162.39)  x 0.00088409 x 0.38% x (1/108.60) = 0.005023      

Difference between the two interest amounts

• 0.054082 -0.005023 =0.049059

Therefore, interest payable to Client A who has BOUGHT 1000 units of EUR/JPY @162.39  is USD 0.049059