A carry trade strategy is a usual operation used in the currency markets (known as FOREX also) where an investor sells a currency at a relatively low interest rate and uses those funds obtained to buy another currency that can offer a rate of interest (or performance) greater. The idea behind is to obtain the difference between the two rates that can be significant.
The rationale is that there are instruments with different returns nominated in different currencies. In the world currency market, the carry trade is popular among relatively safe currencies (with low volatility and low interest rates), such as the Euro or the British Pound, and exercise this strategy in more volatile and riskier currencies ( emerging markets or border).
It is important to bear in mind that both the values of currencies and interest rates are subject to the volatility of the markets and the different macroeconomic events. Some can enhance the gain, as well as incur a loss.
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