What is Currency Carry Trade?
Currency carry trade is a strategy where you borrow money in a low-interest-rate currency and invest it in a high-interest-rate currency, profiting from both the interest rate differential and potential currency appreciation.
Understanding Interest Rate Differential
Interest rate differential is the gap between borrowing and investment currency interest rates. A higher differential potentially means higher returns, but also comes with increased risk.
Currency Exchange Risk
Exchange rates can significantly impact carry trade returns. If the investment currency depreciates against the borrowing currency, it could offset or exceed the interest rate gains.
How to Use This Calculator?
Select your borrowing and investment currencies, enter the amount, and specify the interest rates. The calculator will show potential returns considering both interest rate differential and projected exchange rate changes.