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How To Catch a Rising Economy

Traders work in the ten-year U.S. Treasury Note options pit at the Chicago Board of Trade in Chicago, Illinois, U.S.
Daniel Acker | Bloomberg | Getty Images
Traders work in the ten-year U.S. Treasury Note options pit at the Chicago Board of Trade in Chicago, Illinois, U.S.

Strategists are looking for ways to trade on signs of U.S. economic renewal.

Friday's nonfarm payroll report didn't just upend forecasts for the U.S. economy. It also sent strategists to their screens to identify the best ways to play it. With low U.S. interest rates, the dollar is just one option, and plenty of experts think the other higher-yielding North American currencies have more potential. Two pros weigh in here.

Rebecca Patterson, chief markets strategist for J.P.Morgan's institutional arm, says your choice of currency is all about your risk tolerance. "If risk appetite holds in and the US keeps doing okay, the Mexican peso will tend to outperform the Canadian dollar. It has higher yields and is less liquid," she told me. "The Canadian dollar is a better trade for relatively more conservative investors who still want to position around a U.S. recovery. Less yield but relatively less volatile."

Patterson went long the Mexican peso in December, partly as a play on the U.S. economy, and she reached her profit target in late January. But she says she still likes the peso against the dollar and against the yen, another safe-haven stalwart.

Willie Williams, director of institutional derivative sales at Societe Generale, has another take. "I like the Mexican peso much more than the Canadian dollar," he told me. "The peso is higher beta and higher carry." Still, Williams points out the peso has had a big move, and he does not recommend adding to positions now.

The short version: if you have an appetite for risk, keep an eye on the peso. If you're move conservative, consider the loonie. And either way, keep a weather eye on the U.S.

Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm and repeats on Saturdays at 7pm.

Learn more: The essential vocabulary for currency trading is on Key Terms Dictionary. Top currency strategies are broken down for you in Currency Class.

Talk back: Tell us what you want to hear about - email us at moneyinmotion@cnbc.com.

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