Analyst Weekly: Carry Trades, AI Software, Korea, Walmart & Crypto

FX traders are getting a reminder that sometimes getting paid to wait can matter more than picking the next big currency comeback.

Currencies backed by higher interest rates have been among the stronger performers, helped by relatively calm markets and decent global growth. For FX traders, that interest-rate gap can itself become part of the trade. Buying a higher-rate currency against a lower-rate one can come with an overnight financing benefit (although on CFDs the actual fee or refund depends on the currency pair and can change over time).

That has kept currencies including the Mexican peso, Australian dollar and Norwegian krone on traders’ radar, particularly against lower-yielding alternatives such as the Swiss franc.

The flip side? Cheap doesn’t automatically mean ready to rebound. The Japanese yen remains historically inexpensive by some measures, but Japan’s interest rates are still well below US levels. That gap can make betting on a sustained yen recovery difficult while US rates stay elevated. EUR, CAD and NZD face a similar, if less extreme, challenge: improving economic momentum has yet to overcome their yield disadvantage.

For retail FX traders, this creates several pairs to watch. USD/JPY remains sensitive to the US-Japan rate gap, while AUD/CHF and NOK/CHF can reflect the contest between higher-yielding cyclical currencies and lower-yielding funding currencies. EUR/USD remains closely tied to expectations for US rates.