Assume that the interest rate on borrowing in Japan is 1 percent, while the interest rate on deposits in Australian banks is 5 percent. A trader borrows in yen and then converts the money into Australian dollars and deposits it in an Australian bank to make a 4 percent margin. Which type of trade is this an example of?

a, swing trade

b, carry trade

c, channel trade

d, price action trade

Question

Business

Krista Walls

1 July, 08:15

Assume that the interest rate on borrowing in Japan is 1 percent, while the interest rate on deposits in Australian banks is 5 percent. A trader borrows in yen and then converts the money into Australian dollars and deposits it in an Australian bank to make a 4 percent margin. Which type of trade is this an example of?

a, swing trade

b, carry trade

c, channel trade

d, price action trade

+1

Answers (1)

Know the Answer?

Jose Nichols · Answer 1

The correct answer is option is b.

Explanation:

Swing trade is a trading strategy where attempts are made to earn profit from the stocks in a span of a few days.

Carry trade is a type of currency trading strategy. Under this strategy, money is borrowed in a currency which has a lower interest rate then converted and deposited into the currency which has higher interest rates. In this way, profit is earned.

Under channel trading strategy, the trading is done in a certain channel which represents the value of assets for a specific period. It is for short term and medium term.

Under the price action trading strategy, the price movements in the market are studied and trading is done on this basis.