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Carry Trade

Advanced Tradingadvanced
Updated 1/15/2024

Definition

A carry trade involves borrowing in a low-interest-rate currency and investing in a high-interest-rate currency to profit from the interest rate differential. Popular during stable market conditions.

Example

Borrowing Japanese Yen (low rates) to buy Australian Dollars (higher rates), earning the interest differential while hoping for favorable exchange rate movement.

Tags

#advanced#strategy#interest
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