Hi,
As we see that currency carry trade refers to the act of borrowing one currency that has a low interest rate in order to purchase another with a higher interest rate. A large difference in rates can be highly profitable for the traders, especially if high leverage is used. However, with all levered investments this is double edged sword, and large exchange rate fluctuations which can suddenly be swing to trade into a huge loss.
As we see that currency carry trade refers to the act of borrowing one currency that has a low interest rate in order to purchase another with a higher interest rate. A large difference in rates can be highly profitable for the traders, especially if high leverage is used. However, with all levered investments this is double edged sword, and large exchange rate fluctuations which can suddenly be swing to trade into a huge loss.
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