Inside the Currency Market: Mechanics, Valuation, and Strategies

Trade Strategy

Fix flows are released by banks and research companies so market professionals can gauge direction of interest rates. View the three-month LIBOR. Look for crosses to determine where one nation's rates trade above or below another. For example, suppose U.S. dollar LIBOR traded above Japanese yen. This is a sell U.S. dollar/Japanese yen trend trade because U.S. dollar rates are not only higher, but they may be higher for purposes of expectations of future higher benchmark interest rates or an economic boom to follow. Suppose three-month U.S. dollar rates crossed above British pound rates. Buy British pound/U.S. dollar. If U.S. dollar rates crossed below British pound, sell British pound/U.S. dollar. View correlations from overnight ...