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Choosing Overnight Rates for Currency Analysis

Article Quant Q&A · Author: niken
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Summary

The document considers how to track overnight or near-overnight interest rates across major and emerging-market currencies. It points to overnight LIBOR and overnight indexed swap (OIS) rates as possible series to follow, with LIBOR described as easier to find and OIS as a closer proxy for risk-free rates.

The key caveat is that LIBOR includes bank credit risk, which can bias analysis that treats it as a clean short-term rate. The answer also names the US federal funds rate and the European Central Bank refinancing rate as available reference rates for those currencies. It does not provide data sources, compare coverage across currencies, or assess the rates’ suitability for a particular trading strategy, so users would need to verify availability and definitions for their use case.

Key ideas

  • Overnight LIBOR and OIS rates are candidate measures for short-term rates across currencies.
  • OIS rates are presented as closer to risk-free than LIBOR rates.
  • LIBOR includes bank credit risk, which may bias analysis.
  • The federal funds rate and ECB refinancing rate are also mentioned for USD and EUR, respectively.

Tags

ForexFixed income
Full text
# What is a good index to track short term interest rates?


# What is a good index to track short term interest rates?












This is an FX question. I want to track short term (overnight or next best thing) rates for major/em ccys. What's the best way of doing this? Is there an index I can follow? Preferably something published for free somewhere. :)

## Answer by not.so.quanty (score 4, accepted)

https://quant.stackexchange.com/a/10599

Look for the Overnight LIBOR or OIS rates for each currency. It's easier to find LIBOR rates by the way, but OIS are closer to being risk-free. In a nutshell, LIBOR rates contain bank related credit risk which may induce bias your analysis.

Also available for the USD is the fed funds rate and the ECB refinancing rate for the EUR.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.