How To Profit From A Euro-Based “Carry Trade”

Reda Farran

4 months ago3:38 mins

How To Profit From A Euro-Based “Carry Trade”

It’s been a tough year for the euro, which has fallen to parity with the US dollar amid a dicey backdrop for the region. But it’s also boosted the potential of one particular trade that’s both shown strong returns – as much as 29% this year – and low correlation with traditional asset classes. So here’s how this “carry trade” works exactly, and how you can replicate it yourself.

What is a carry trade?

A carry trade involves buying higher-yielding currencies by borrowing funds in lower-yielding currencies. In practice, that means buying those with high interest rates and selling those with lower rates. The rationale is that the returns from the former tend to outweigh the latter in the medium term, when you factor in both currency price moves and the income earned from t

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