A currency carry trade is a strategy in which a high-yielding currency funds the trade with a low-yielding currency. A trader using this strategy attempts to capture the difference between the rates, which may often be substantial, counting on the quantity of leverage used.
The carry trade is one among the foremost popular trading strategies within the forex market. The most popular carry trades have involved buying currency pairs such as the Australian dollar/Japanese yen and New Zealand dollar/Japanese yen because the rate of interest spreads of those currency pairs have been quite high. The first step in producing a carry trade is to seek out out which currency offers a high yield and which one offers a low yield.
The currency carry trade is one of the foremost popular trading strategies within the currency market. Consider it like the motto “buy low, sell high.”