Inside the Currency Market: Mechanics, Valuation, and Strategies

Currency Trading and Yield Curves

Currency traders determine trades based on yield curves between two nations. This historic development apparently began in 2007 with Arnaud Mehl in Open Economies Journal when he looked at the yield curve as a predictor of industrial production and inflation in emerging market economies based on the euro and U.S. yield curve. Building on decades and piles of previous research, Mehl found prediction factors compelling. Mehl's findings allowed nation-to-nation research to continue into yield curve comparisons, and this phenomenon gave currency traders an opportunity to trade the curve and trade various comparisons of the curve slope. Further, Mehl's research allowed deeper comprehension of yield-curve slopes. As ...