Interest rates

[Durai007]

Hi Friends,

I wanted to know if the interest rates in US increases, what should one must do from indian perspective.

Should we go long on USD/INR future contract or
Should we go short on USD/INR future contract.

Or either of both.

Thanks in advance.
durai007.

 

[amlearning]

Your question is half:

Interest rates in US increases and what about INR??? How is the interest rate for INR as compared to USD?

Lets assume interest rate for INR is much lesser when compared to USD. Money flows out from INR into USD. USD becomes stronger in comparison to INR, so, in the USD/INR chart, you see it goes northward**.

A fall in interest rates disinterests investors from purchasing assets in that economy, since the return on their investment is now smaller. The economy's currency will depreciate as a result of the weaker demand.

But I'm not sure if this would be helpful when you're trading short term / smaller tf.

Remember trading in currency ALWAYS involve two currencies - i.e., two nation's economic conditions. Never forget this and you're half step ahead of rest.

** discarding all other variables.