The USD/CAD pair rose the most in 13 months

Forexmentor.com Forex Trading Price Action

Last Thursday, traders unwound risky bets on currencies where interest rates may be headed higher – this in response to declining global stocks. As a consequence, the Canadian dollar fell the most in 13 months. Translation: The USD/CAD pair rose the most in 13 months.

The Canadian dollar was one of 10 major currencies to drop versus the yen. Traders have borrowed in Japan to buy assets in countries such as Canada, where rates are higher than the benchmark rate of 0.5% in Japan. This is known as the ‘Carry Trade.’ Traders became risk averse, abandoned those carry trades, and bought back yen, as stocks fell, and speculation mounted that losses would climb from sub-prime mortgages.

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