What is a currency carry trade?

<p id="isPasted">The carry trade is one of the most popular trading strategies in the currency market. Putting on a carry trade involves nothing more than buying a high-yielding currency and funding it with a low-yielding currency.</p><ul><li>A currency carry trade is a strategy that involves borrowing from a lower interest rate currency to fund the purchase of a higher interest rate currency.</li><li>A trader uses this strategy in an attempt to capture the difference between the rates which can be substantial depending on the amount of leverage used.</li><li>Carry trades come with risk because they're often highly leveraged and overcrowded.</li><li>Carry traders can recognize profit or loss on the value appreciation or depreciation of the currency pair in addition to potentially earning interest.</li></ul>