Interest rates , we can get a profit when forex transactions through the difference in interest rates of the two currency pairs which we then call carry trades.
This advantage is obtained when we sell currencies that have low interest rates and then buy currencies with high interest rates. And we will benefit from the difference in interest rates .
Currency cross pairs provide a lot of opportunities for us to be able to carry out carry trades with a high difference in interest rates.
For example is the AUD / JPY currency cross pair which if we look through the graph above moves in an uptrend. And if we have a LONG (BUY) AUD / JPY position in a long time (year period) then we will get a truly extraordinary profit.
Now in 2002 – 2007 the difference in interest rates between AUD and JPY was very large. At that time the central bank of Australia set interest rates almost at 6.25% and when at that time the BOJ (Japan’s central bank) set an interest rate of 0%.
We will not only benefit from the difference in currency value prices but also benefit from the difference in interest rates. Absolutely fantastic …