U.S. Dollar Carry Trade Gains in Popularity

Spread betting and contracts for differences on the spot forex market should consider that the U.S. dollar carry trade is becoming more popular right now. As the euro gains in forex trading, the dollar is being used a funding currency.

In the carry trade, the funding currency is borrowed cheaply (a low yielding currency -- like the dollar is now) and used to buy amounts of a different currency with a higher yield. The difference in interest rate can make the difference in earnings for the forex trader. 

This is a risky move, though, since the carry trade is often leveraged. Right now, with its low interest yield, the U.S. dollar is being used as a funding currency. And with risk appetite returning for at least today, it appears as though spot forex traders are willing to run the risk.