A #carryTrade involves borrowing money in a currency with a low interest rate and investing it in a currency with a higher interest rate to profit from the interest rate differential.

For instance, an investor might borrow in a currency like the Japanese yen, where interest rates are low, and then invest in a higher-yielding asset, such as U.S. dollars.

The investor earns the interest rate differential between the two currencies. However, carry trades involve risks, including exchange rate fluctuations, which can erase potential gains if not managed carefully.