Forex Carry Trade Calculator
Reviewed by Hamza Gujjar, Algorithm Architect & Software Developer
Last updated: July 27, 2026Forex Carry Trade Calculator
A carry trade involves borrowing (or going short) in a currency with a low interest rate and using the proceeds to hold a currency with a higher interest rate, aiming to pocket the difference. This calculator estimates the annualized return from that rate differential alone, before any exchange rate movement.
| Input | Example Value |
|---|---|
| High-yield currency rate | 5.5% |
| Low-yield currency rate | 0.5% |
| Position size | $100,000 |
Rate differential = 5.5% - 0.5% = 5.0%. Annual carry return = $100,000 x 5.0% = $5,000.
The Risk Behind the Reward
Carry trades were extremely popular strategies during periods of low volatility, most famously the yen carry trade of the 2000s. The danger is that carry trades tend to unwind violently during risk-off market events - a sharp adverse currency move can erase months or years of accumulated interest income in a matter of days. This tool estimates the interest component only; it does not account for exchange rate risk, which is often the larger factor in a carry trade's actual outcome. This is informational only, not financial advice.