mengxu

zazu11: the logic is the other way around, you buy (borrow) the lower rate ccy and sell (lend) the higher rate ccy. So, if i went to a bank and borrowed $100 at 5% and then lent it in Euros at 6% and the USD/EUR rate was 1.00, i would borrow as many $$$ as i could to take advantage of this trade, the increased demand for $$$ would lead to appreciation.