Declining Profits from Carry Trades Strengthen Dollar

The U.S. dollar rose today on the outlook that the greenback may become more attractive as the profits from the carry trades declines because of decreasing differences in the interest rates of various central banks.

The profits from the carry trades are waning as the higher-yielding currencies appreciate and the low-yielding ones declines. This situation is just right for the dollar to strengthen, making it more attractive to the traders, who already prefer the U.S. currency because of the record low U.S. borrowing costs (0–0.25 percent).

Carry trades is the strategy of raising money in the countries where interest rates are low and investing where rates are higher. The economists say that the profits from such trades are falling and the only high-yield currency reasonable to invest in remains the Australian dollar.

EUR/USD went down to 1.3334 as of 18:26 GMT today from the opening price of 1.3345. USD/JPY traded near 94.12 after it opened at 94.08. USD/CAD rose to about 1.0001 from its opening level of 0.9990.

If you have any questions, comments or opinions regarding the US Dollar,
feel free to post them using the commentary form below.