ββ#ForexChief #dollar #forexnews #CarryTraders #stocks #market #profit #Powell #Fed #BankOfCanada β
π΅ While the dollar suffers, carry traders earn
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π Statistics show that non-standard market thinking allows not only to protection investments, but also to earn consistently. While Powell is justifying himself before Congress for the illogical actions of the Fed, and the market is trying to predict the fate of the dollar and the dynamics of inflation, foreign exchange deals on exotic pairs show excellent returns.
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All these "feelings" about the dollar, oil and global politics are of no interest to currency speculators who are professionally addicted to the carry trade.
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For example, the economy of Canada, like the economy of Mexico, is closely related to the US economy. The correlation between the Canadian dollar and the peso remains consistently positive. The Canadian dollar last year most noticeably reacted to the decline in the decline in appetite for shares, while the peso, on the contrary, rose in price along with the growth of shares. This dynamic makes it attractive to borrow currency in Canada and buy pesos with it.
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The carry trade, which involves a long position in pesos and a short position in Canadian dollars, made it possible to earn 25% in 2022 and even in February 2023 - more than 6%. At the same time, those who simply bought and held the dollar in 2022 were able to get a profit several times less (about 5%), and in February 2023 - only 2%.
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And now the Canadian dollar hit a 7-year low against the Mexican peso ahead of the Bank of Canada meeting. The regulator has kept the overnight discount rate at 4.5% and promises to keep this level until the end of the year.
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This widens the rate differential between the US and Canada, although if optimism about the Chinese economy picks up, rising oil prices may prevent the Canadian dollar from falling significantly against its US counterpart. But that doesn't matter. The main thing is to understand in principle how the growth or fall rates will change, and while the dollar is trying to get out of its traps, you can try more subtle currency strategies.
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Profits to yβall!