Commodity Futures and Forex Interest Rates What’s the Difference????
This is a test.
ryan_mancuso767 asked:
I have been trading commodity contracts for about a year and have done good for myself. However, I have been considering trading forex as well. I know that interest rates affect the forex markets depeding on the pairs traded.
ryan_mancuso767 asked:
I have been trading commodity contracts for about a year and have done good for myself. However, I have been considering trading forex as well. I know that interest rates affect the forex markets depeding on the pairs traded.
Additionally, I know that interest rates affect weather you receive/payout on certain pairs, however, im not sure with rate drives this.
Also, I came across an excellent blog post regarding
the bond futures market http://www.aarontrade.com/commodityfuturestrading/?p=25
Are forex interest rates affected by this 30 year rate or something else? If bond futures do enter a long-term bear market how does this affect forex interest rates?
Thanks for any potential help
Ryan
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Comment by Baldy
December 30, 2007 @ 10:41 pm
Definitely interest rates (plus other things) affect foreign exchange levels. The thing is you need to look at both countries interest rates. If you’re trading US Dollar vs Canadian Dollar, you need to look at US and Canadian rates.
If one of the two countries (say the US) raises it’s rates, some people will move their money into that countries currency (USD) and that currency should strengthen.
If you’re trading forex futures you should look at the interest rates in the two countries around the time of your future’s expiry. I.e. if you’re trading a future that expires in 3 Months, you should look at the 3 month interest rates in both countries (so you could look at the interest rates of bonds maturing in 3 months, or cash deposit rates for 3 months).
I.e. I believe you will find that the price for a USD->CAD forex future expiring 3 months from now is the current USD->CAD fx spot price (1.13) + (USD 3M rate - CAD 3M rate)*3/12. Which would end up giving you something like 113.2 .