You can profit from the interest rate differential as well as price appreciation by selling currencies whose country has a lower interest rate against currencies whose country has a higher interest rate.

Currency crosses provide a plethora of pairs with large interest rate differentials that are ideal for these types of trading.

Take a look at the nice uptrend on AUD/JPY, for example. You would have profited handsomely if you had a long position on this pair.

Furthermore, the interest rate spread between the AUD and the JPY was enormous.

From 2002 to 2007, the Reserve Bank of Australia hiked interest rates to 6.25%, while the Bank of Japan kept rates at 0%.

That means you profited from your long position asand the trade’s interest rate differential