Question

Assume that the interest rate on borrowings in india is 1 percent while the interest rate on bank deposits in a u.s. bank is 6 percent. john, an active currency trader, borrows in japanese yen, converts the money into u.s. dollars and deposits it in a u.s. bank. the speculative element of john's carry trade is that its success is based upon his belief that

Answer 1

Those who try to benefit from a carry trade are hoping to borrow money at a low interest rate so that they can invest in something that will provide a higher return. People commonly do this between different foreign exchange markets to make the most on their return from investing in different country currencies.