What Are High-Interest Currencies? The Appeal of Swap Points and the Double-Edged Sword Called “Averaging Down”

Since high-interest currencies have come up a few times in my trading stories,
I thought I’d briefly explain what they actually are.

What Is a High-Interest Currency?

A high-interest currency is exactly what it sounds like:
a currency issued by a country with a high policy interest rate.

Typical examples include:

• Turkish Lira (TRY)
• Mexican Peso (MXN)
• South African Rand (ZAR)

When interest rates are high,

simply holding the currency allows you to earn more interest.

This is the biggest attraction of high-interest currencies.

The Appeal of High-Interest Currencies in FX (Swap Points)

In FX trading, there is a mechanism called a swap point.

When you buy a high-interest currency and sell a low-interest currency
(like the Japanese yen),

you earn the interest rate difference as daily income.

For example:

• Turkey interest rate: 20%
• Japan interest rate: 0.1%

That’s an interest rate difference of about 19.9%.

This difference is paid into your account daily as “swap.”

※ Actual swap amounts vary greatly depending on the FX broker,
so checking in advance is absolutely essential.

Advantages of High-Interest Currencies

• Large swap points (your balance grows just by holding)
• Easy to start with small amounts (peso and rand have low exchange rates)
• In range-bound markets, time can work in your favor

Disadvantages of High-Interest Currencies (The Hidden Traps)

• High volatility (emerging market currencies are unstable)
• Inflation risk (high rates usually mean serious inflation problems)
• Currency depreciation risk (long-term downtrends are common)

If you celebrate “daily swap profits!”

your entire account can be wiped out by exchange rate losses.

This is a very common beginner mistake with high-interest currencies.

Major High-Interest Currency Pairs

Currency Pair	Characteristics	Advantages	Risks
TRY/JPY	Extremely high interest	Very large swap	Long-term downtrend risk
MXN/JPY	Relatively stable high interest	Beginner-friendly	Dependence on oil and the U.S.
ZAR/JPY	High interest	Suitable for range trading	Political and resource risks

Common Investment Styles for High-Interest Currencies

• FX accumulation plans (buying small amounts regularly)
• Range trading combined with swap income
• Repeated profit-taking and reinvestment

Is Averaging Down Really Bad? (My Personal Conclusion)

“Averaging down equals danger.”

I think this is half true, and half false.

The real problem is averaging down without a plan.

If you plan it from the beginning by:

• Deciding how much capital you’ll use
• Setting a maximum number of additional entries
• Defining your final buying point in advance

Then averaging down can become a strategy, not a gamble.

My Real Experience: How I Think About Averaging Down

For example, when Bitcoin or stock indices crash sharply.

Even when the news is screaming “Market Crash!”:

• I wait and observe for a few days
• If the drop seems to slow, I buy a very small amount

At this stage, I assume:

“It could still go lower.”

So I always keep cash in reserve.

If it falls further, I buy a little more.

And before entering, I decide:

“This is the final line. I won’t buy beyond this point.”

Setting that limit in advance is critical.

Whether You Can Tolerate Unrealized Losses Is the Key

If you buy assuming prices will rise,
watching unrealized losses grow is honestly painful.

However, if:

• Your risk management is solid
• You’re prepared to hold for years

Then you can continue without destroying your mental health.

My current USD/CHF strategy is calm precisely because:

averaging down was part of the design from the start.

Conclusion: How to Properly Use High-Interest Currencies and Averaging Down

High-interest currencies are:

not “dream currencies,” but tools with very strong quirks.

The same applies to averaging down.

Without planning, it leads to ruin.
With proper design, it can become a weapon.

Avoid greed. Prioritize risk management above all else.

If you can do that,
high-interest currencies and averaging down
can become valid options for long-term asset building.

Related Articles

• Before I Knew It, I Had Stepped into FX
• What Is FX? A Simple Explanation
• How I Fell into Another Trap with High-Interest Currencies (Part 1)
• How a High-Interest Currency Slammed Me with Reality (Part 2)
• What Are High-Interest Currencies? Swap Appeal and the Double-Edged Sword of Averaging Down
• What Is Averaging Down? A Strategy That Can Be a Weapon—or a Landmine

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I’m not fluent in English, but I really wanted to share this story.
So I tried my best using translation tools to write this post.
If you find anything that sounds strange, unnatural, or offensive,
please let me know in the comments.
I’ll check it carefully, translate your feedback, and fix it.
Thank you for reading!