ECON545 Week-5 Discussion 2

Foreign exchange traders make their money by buying low and selling high currency. For example, a trader may purchase a Mexican peso  (watching) as the peso to US dollar goes up. He/She then may sell the peso for US dollars when it is believe that the peso may go down or another currency exchange rate yields higher amounts.

"Something to remember is that money often follows interest rates. When the interest rates raise, investors will want to capitalize high returns and you will see money flowing into the country. When one country's interest rates rise, their currency is seen as being stronger than other currencies. This happens because investors seek more of that currency to profit more. Otherwise, it is seen as a good thing when interest rates rise and a bad thing when they fall" (Streetdictionary,2015). 

Streetdictionary. (2015). Do Interest Rates Drive The Foreign Exchange Markets?. Retrieved March 29, 2015, from http://www.streetdirectory.com/travel_guide/36986/investment/do_interest_rates_drive_the_foreign_exchange_markets.html

 
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