Interest rates and long term trends | Forex Factory

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Interest rates and long term trends

  • #1
  • First Post: Nov 7, 2018 2:46am Nov 7, 2018 2:46am
Hi guys! This is my first thread, so I wanted to get opinions on what effect, if any, the interest rates have on the long term value of a currency.

Right now, my trading strategy uses interest rates as one factor to take into account of what to buy, and when
  • #2
  • Nov 7, 2018 4:32am Nov 7, 2018 4:32am
Quoting Drifter243
Hi guys! This is my first thread, so I wanted to get opinions on what effect, if any, the interest rates have on the long term value of a currency. Right now, my trading strategy uses interest rates as one factor to take into account of what to buy, and when
To get the best out of this strategy you need to focus on expectations of rates rather than the rates. You could get a central bank that raises rates like the BOE which are doing it at a rate of 1 a year. If you used rates alone you would end up holding something you don't want to be holding for longer than you wish (roll-over could also gnaw at your bottom line if you hold for very long periods but this can also work in your favour).
  • #3
  • Nov 7, 2018 4:55am Nov 7, 2018 4:55am
Quoting Drifter243
Hi guys! This is my first thread, so I wanted to get opinions on what effect, if any, the interest rates have on the long term value of a currency. Right now, my trading strategy uses interest rates as one factor to take into account of what to buy, and when

Higher interest rate - more supply from lenders, less demand from borrowers. That's how we arrive to equilibrium. In terms of exchange rate, raising rate leads to inflow of capital from abroad, hence national currency has to appreciate
  • #4
  • Last Post: Nov 7, 2018 9:22am Nov 7, 2018 9:22am
Quoting EcoTrader
{quote} To get the best out of this strategy you need to focus on expectations of rates rather than the rates. You could get a central bank that raises rates like the BOE which are doing it at a rate of 1 a year. If you used rates alone you would end up holding something you don't want to be holding for longer than you wish (roll-over could also gnaw at your bottom line if you hold for very long periods but this can also work in your favour).
I agree with what you are saying. I dont open trades that have negative rollover in the first place, so even though in the short term I could be "wrong", in the long term I still make some money
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