• Predicting Interest Rates and Make Money

    There is just one simple reason - you stand to make money on it. Let us say there is a repo rate (the rate at which a country's central bank lends to other banks) of 7%. If it increases to 7.5%, the currency becomes dearer and if you have already invested in it, you can expect to make a profit by selling it. If on the other hand, the repo rate decreases to 6.5%, the currency becomes less expensive and you can still make profit if you short sell it. A Japanese day trader made $34 million when China devalued the Yuan, its national currency.

     

    So you see why how that drives the values of currencies worldwide, and how predicting it accurately can yield large benefits.

     

    Predicting interest rates

     

    The fact is that while it is each country's central bank that decides the repo rate, it is not at random. Key indicators you need to watch out for are the Consumer Price Index (CPI), employment rates, consumer spending, and the housing market. If any of these are down, you can expect the central bank's rate to go down as they try to increase borrowing, which means more money for the market that could push all these indices up.

     

    Listen for major announcements: The heads of central banks often talk to the media about how they view inflation. This can have a major bearing on the next interest rate hike of cut. The Chairman of the Federal Reserve once read out his monetary policy to the House Committee, in which he talked about 'stabilizing' the U.S. dollar when the world was in the grip of a recession. What it means is that inflation would be curbed. And this is done by reducing the amount of spending money available in the market. For this, interest rates must be increased, and that is exactly what happened. Traders who acted on the announcement made profits of $440 within one hour as the dollar appreciated by 0.44% in that short time period.

     

    There is plenty of advice available online: Another way would be to take about four or five interest rate predictions by major brokerages or experts and act on the average. The chances are that they would be similar, if not identical.

     

    So it is really possible to keep a tab on every currency that is traded in the Forex market? Thankfully no, there are only handful of major world currencies that are watched and reported by media houses closely.

     

    This piece of information is shared by Yee Kok Siong, an arbitrageur and an investor. Mr. Siong is a self-motivated entrepreneur who believes that no market is perfect and it is up-to an individual to understand that imperfect gap and business opportunity and make the most out of it.

     

    To know more about him, please visit here: http://yeekoksiong.strikingly.com/


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