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Currency Carry Trade

Currency Carry Trade is a trading strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. A trader using this strategy attempts to capture the difference between the rates, which can often be substantial, depending on the amount of leverage used. However the risk is that exchange rates change during the period the carry trade is held, which could be much more than the interest earned.

 

 

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