What is a carry trade?

A carry trade means borrowing in a low-interest currency (e.g. JPY at 0.1%) and converting the proceeds to invest in a high-interest currency (e.g. AUD at 4.5%). The trader profits from the rate differential — the "carry" — as long as the exchange rate does not move too much against them.

What is the interest rate differential?

It is the difference between the annualized rate you earn on the invested currency and the rate you pay on the borrowed currency. For example, earning 4.5% and paying 0.1% gives a differential of 4.4% per year.

How does exchange rate movement affect the trade?

If the invested currency depreciates against the funding currency, the principal loses value when converted back, partially or fully offsetting the interest gain. A large depreciation can turn a positive carry into an overall loss.

What does a negative FX change mean?

A negative exchange rate change (e.g. -5%) means the currency you invested in fell in value relative to the currency you borrowed. This reduces your total return and can create a net loss.

Does this calculator account for transaction costs or leverage?

No. This tool models an unlevered, single-leg carry trade with no bid-ask spread or commission. For leveraged positions, scale the P&L by your leverage ratio and remember that losses are magnified equally.

How is annualized return calculated?

Annualized return = (Net P&L / Position Size) × (365 / Holding Days) × 100. It normalizes the result to a per-year basis so you can compare trades with different durations.

Carry Trade Calculator

Estimate carry trade profit or loss from interest rate differentials and exchange rate movements over any holding period.

Trade Parameters

Position Size

Invest Rate (% per year) — rate you earn

Borrow Rate (% per year) — rate you pay

Holding Period (days)

Exchange Rate Change (%) — + appreciates, − depreciates

Interest Income

—

Rate differential × period

FX Gain / Loss

—

From exchange rate move

Net P&L

—

Interest + FX combined

Annualized Return

—

Normalized to 1 year

Break-Even Analysis

Rate differential (annualized) —

Break-even FX change —

Interest income (period) —

Position size —

Summary

A carry trade involves borrowing money in a low-interest-rate currency and converting it to invest in a higher-yielding currency, profiting from the rate differential. This calculator breaks down the interest income earned, the foreign exchange gain or loss from currency movement, and the net result after accounting for both effects. It helps traders and investors evaluate whether a carry trade is worthwhile given expected exchange rate shifts.

How it works

Enter the notional position size in the base (invested) currency.
Set the annualized invest rate (the rate you earn) and the borrow rate (the rate you pay).
Enter the holding period in days.
Input the expected exchange rate change as a percentage (positive = invested currency appreciates, negative = depreciates).
The calculator shows interest income, FX gain or loss, total P&L, and annualized return.

Use cases

Evaluate AUD/JPY or USD/JPY carry trades before entering a position.
Compare net yield against potential currency depreciation risk.
Estimate how much FX movement wipes out the interest differential.
Analyze break-even exchange rate change for a given holding period.
Stress-test a carry trade under adverse currency scenarios.
Compare carry potential across multiple currency pairs simultaneously.

Frequently Asked Questions

Last updated: 2026-05-29 · Reviewed by Nham Vu