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 trader, especially if high leverage is used. However, with all levered investments this is a double edged sword, and large exchange rate price fluctuations can suddenly swing trades into huge losses.

Carry trade

FROM Wikipedia

1. http://nptel.ac.in/courses/110105031/pr_pdf/Module5-5.pdf 2. "Triennial Central Bank Survey Foreign exchange turnover in April 2016" (PDF). Triennial Central Bank Survey. Basel, Switzerland: Bank for International Settlements. 11 December 2016. p. 7. Retrieved 22 March 2017. 3. "Overbought". Investopedia. Retrieved 22 April 2013. 4.  What I Learned at the World Economic Crisis Joseph Stiglitz, The New Republic, 17 April 2000, reprinted at GlobalPolicy.org 5. Lawrence Summers and Summers VP (1989) 'When financial markets work too well: a Cautious case for a securities transaction tax' Journal of financial services 6. "Risk Averse". Investopedia. Retrieved 25 February 2010. 7.  Moon, Angela (5 February 2010). "Global markets – US stocks rebound, dollar gains on risk aversion".  Reuters. Retrieved 27 February 2010. 8. Stewart, Heather (9 April 2008). "IMF says US crisis is 'largest financial shock since Great Depression'". The Guardian. London. Retrieved 27 February 2010.

References

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