High-interest rates can lead to a stronger currency and higher bond yields

[zihadhasan012]

High-interest rates can lead to a stronger currency and higher bond yields. Higher bond yields, on the other hand, leads to lower stock prices as investors rotate from stocks to bonds. In this case, you can buy the country’s currency and short the country’s stocks and indices. Second, inflation numbers create opportunities for carrying trade opportunities. A carry trade is a strategy that involves borrowing money at low interest rates and using the funds to buy a better-yielding asset.


In forex, it works by buying a currency that is in low or negative interest mozambique business email list rates and using the funds to buy a better-yielding currency. The goal in this is to earn the spread in interest rates and also to see the value of the currency they bought rise. A good example of a good pair for carrying trades is the USD/JPY. This is because the US federal funds were at 2.


25% in September 2018 while the BOJ rates were at minus 0.1%. Third, if the central bank has not provided a forward guidance on interest rates, the CPI and PPI numbers can help you forecast about the future of rate hikes. If the CPI shows continued growth of inflation, it is an indication that the central bank will likely raise rates. Alternatively, if the CPI numbers are decreasing, the forecast is that of lower interest rates.