A strategy employed in currency trading, whereby an investor sells a currency with low interest rate and buys a currency with a high interest rate so as to benefit from the interest rate differential of the two currencies. Profits are usually maximised by the use of leverage.
Did you know?
U.S. President Richard Nixon is credited with enabling a free-floating currency system after ending the Bretton Woods Accord.
Word of the day
"Momentum Trader" - A forex trader who places trades around events that are likely to cause market volatility.
Trades usually have more chances of being successful during high market activity.