Thursday, 17 September 2009

Nothing Safe About the US Dollar!

A lot is made about the safe-haven status of the US dollar and the inverse correlation it has with stocks and commodities. When the economy is seemingly doing well, risk-takers look to sell dollars and buy higher-yielding, riskier currencies to earn interest. This is more commonly known as a “carry trade” and I described it in an article last week.

The carry trade is a very easy way to make money and it was formerly only available to sophisticated investors. Now, you can participate from the privacy of your own home! The basic premise behind the carry trade is that you want to borrow a low-yielding currency and invest in a higher-yielding currency. You make the difference in interest. Sounds better than putting your cash in a bank savings account, doesn’t it?

No comments:

Post a Comment