Definicja liquidity effect

An effect that arises when forward exchange transactions are rolled over on the basis of the old forward exchange rate (for the value date of the original transaction), which then differs from the forward exchange rate for the rollover date.

If the original transaction is closed out on the basis of the old rate, the exchange rate difference must be taken into consideration for the rollover. This results in a liquidity shift that affects net income, where the difference amount for the duration of the rollover has to be borrowed or invested on the market.