I have to reply to this.
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Originally Posted by Peterw  So if you buy this pair you think you'll make money over the long term? |
As a matter of fact, if you bought this pair, you have made made money over the long term. If you traded this pair intelligently, you have made a substantial amount of money.
How does the return of the AUD/JPY pair compare to index funds over the last 10 years? I'm too lazy to check, since I'm not a trader anyway. But since you are, maybe you should take the time to do so.
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Do you actually think the interest rate differential will offset the loss from the trade going against you?
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As a matter of fact, yes, it will, over a long enough time frame. Even if it does not completely offset the loss, that is not important because the idea is to trade pairs, not simply do carry trades with them.