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The Carry Trade: Profiting from Interest Rate Differentials

FF
Research Team
|Jan 20, 2026|8 min read

An introduction to one of the most popular institutional trading strategies in forex.

The Carry Trade is the bedrock of FX flows. In simple terms, it involves borrowing a low-interest-rate currency (like JPY or CHF) to buy a high-interest-rate currency (like USD or GBP), profiting from the differential (swap).

While retail traders focus on 15-minute charts, trillions of dollars move based on these yield differentials. Understanding "Carry" explains why a currency pair can trend upwards for months despite bad news—as long as the yield spread remains attractive, institutions will hold.

Put these concepts into practice.

See how fundamental data shapes currency bias with real-time economic indicators and sentiment analysis.