Carry

In foreign exchange and finance, carry refers to the profit or cost earned from holding a position due to the interest rate difference between two currencies (or yields on two assets).

When you hold a currency with a higher interest rate while funding it with a lower-rate currency, you earn positive carry. The reverse — paying higher rates than you receive — is negative carry.

Example:

A trader borrows Japanese yen at 0.5% to buy Australian dollars yielding 4%. The 3.5% difference is the carry — the income gained if exchange rates stay stable.

Used in:

FX trading (“carry trades”), bond markets, and treasury funding strategies where interest rate differentials drive returns.