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Answer:
A carry trade is a trading strategy where you sell or borrow money with lower yields to finance and buy those that have higher interest rates. By doing so, you also profit from the interest rate differential of the two assets. For example, the AUDJPY pair is a favorite nowadays for carry trades. As we all know, the yen has an interest rate of 0.10% while Australia has 4.25%. So if you go long on the pair, you effectively profit 4.15%.
