Trading the Interest Rate Parity
A Guest Post by FXTM
One of the approaches that traders use to make profits in the forex market is known as a carry trade. This is when traders borrow one currency with a low interest rate and then use this to buy another currency with a high interest rate. For example, if the trader borrows currency A with a 1% interest rate and then uses this to buy currency B with a 5% interest rate, they can pocket the 4% difference – minus any other borrowing costs.
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