Daily Forex Update: AUD/JPY

The AUD/JPY, popular for its carry-trade status, is trending lower today as investors sell Australian Dollars and buy Japanese Yen. A carry-trade is a strategy typically used by traders to capitalize on the difference between interest rates of two countries: since, for example, the Australian Dollar has a rate of 4.5% and the Japanese Yen has a rate of 0.10%, traders will borrow (i.e. sell) Yen and buy Dollars. This allows a trader to borrow at a low rate in order to fund the purchase of a higher-yielding asset. Today’s stronger Japanese Yen is contrary to this approach.