How to play a rising euro

Currencies are complex. Good or bad economic news can quickly send a currency moving up or down, so traders need a certain amount of political foresight. But how do you turn that into financial gain? By betting on currency pairs. Tim Bennett explains.

Despite the cucumber spat that broke out between Spain and Germany this week (over claims the Spanish have been exporting vegetables riddled with E.coli), the euro has been rising recently. It is now at a three-week high against the US dollar. But why and how can a spread better play any further gain?

Currencies are complex in that they are bellwethers for their respective economies. So, any piece of news that affects the US can affect the US dollar. And, because they always trade in pairs, a poor piece of US news can cause, say, the euro to strengthen against the dollar even if nothing much has altered in the eurozone. So, currency traders need to hone in on a particular pair and watch for anything that could affect either side of it and hence the relevant exchange rate.

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.