Describe a carry trade scenario in plain language

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1️⃣

Xiao A borrows 10 million yen (JPY) from the Bank of Japan at a very low interest rate, which is what we call a low-interest currency

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Since Japan's interest rate is close to 0, Xiao A almost does not have to pay interest

2️⃣

Xiao A converts yen into Australian dollars (AUD) (a high-interest currency) and gets 125,000 Australian dollars.

3️⃣

Xiao A invests this money in Australian government bonds with an annual interest rate of 5%. After one year, the interest income is 6,250 Australian dollars

4️⃣

Convert a total of 131,250 Australian dollars back to yen and return it to the Bank of Japan, and the rest is profit

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