Carry Trade Calculator — Forex Interest Rate Differential
Calculate carry trade income from interest rate differentials. Enter your position size, long and short currency rates, and leverage to see your annual, monthly, weekly, and daily carry income — plus your return on margin.
Total notional value of your trade
e.g. 10 for 10:1 leverage
e.g. USD: 5.25% (the currency you are buying)
e.g. JPY: 0.10% (the currency you are selling)
Annual Return on Margin
+51.50%
positive carry
Annual Carry
+$5,150.00
Monthly Carry
+$429.17
Weekly Carry
+$99.04
Daily Carry
+$14.11
Required Margin
$10,000.00
Rate Differential
+5.15% per year
Break-even price move: 5.15% — the pair can move against you by this much before carry income is wiped out.
| Price Change | Price P&L | Carry | Net P&L |
|---|---|---|---|
| −5% | −$5,000.00 | +$5,150.00 | +$150.00 |
| −3% | −$3,000.00 | +$5,150.00 | +$2,150.00 |
| −1% | −$1,000.00 | +$5,150.00 | +$4,150.00 |
| +0% | +$0.00 | +$5,150.00 | +$5,150.00 |
| +1% | +$1,000.00 | +$5,150.00 | +$6,150.00 |
| +3% | +$3,000.00 | +$5,150.00 | +$8,150.00 |
| +5% | +$5,000.00 | +$5,150.00 | +$10,150.00 |
* Carry income is estimated from the interest rate differential only. Broker swap rates, overnight fees, and currency price movements are not included. Always verify swap rates with your broker before trading.
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How to Use the Carry Trade Calculator
Enter your position size in USD — this is the total notional value of your forex trade, not your margin. For a standard lot, this is $100,000. For a mini lot, $10,000.
Set the long currency interest rate — the central bank rate for the currency you are buying. For a USD/JPY long trade, this is the US Federal Reserve rate (e.g. 5.25%). Set the short currency interest rate — the rate for the currency you are selling. For USD/JPY, this is the Bank of Japan rate (e.g. 0.10%).
Enter your leverage (e.g. 10 for 10:1). The calculator uses this to compute your required margin and amplified return on margin percentage. The result updates as you type, showing your full income breakdown and effective return on deployed capital.
A green return on margin indicates positive carry — you earn the differential; a red one means negative carry — you pay it. Always confirm actual swap rates with your broker, as they include their own markup on top of the central bank differential.
The Formula
The carry trade calculator uses the following formulas:
- Rate Differential = Long Currency Rate − Short Currency Rate
(e.g. 5.25% − 0.10% = 5.15%) - Annual Carry (USD) = Position Size × Rate Differential ÷ 100
(e.g. $100,000 × 5.15 ÷ 100 = $5,150/year) - Monthly Carry = Annual Carry ÷ 12
- Weekly Carry = Annual Carry ÷ 52
- Daily Carry = Annual Carry ÷ 365
- Required Margin = Position Size ÷ Leverage
(e.g. $100,000 ÷ 10 = $10,000) - Annual Return on Margin % = Annual Carry ÷ Required Margin × 100
(e.g. $5,150 ÷ $10,000 × 100 = 51.5%)
The model assumes a simplified linear relationship between the rate differential and carry income. Real broker swap rates vary: they embed a markup (typically 0.25–1.0%) and use interbank rates rather than central bank policy rates directly.
Practical Examples
Example 1 — Classic USD/JPY Carry Trade
- Position Size: $100,000 (1 standard lot)
- Long (USD): 5.25% | Short (JPY): 0.10% | Leverage: 10:1
- Rate Differential: 5.15%
- Annual Carry: $5,150
- Monthly: $429.17 | Daily: $14.11
- Required Margin: $10,000
- Return on Margin: 51.5% per year
USD/JPY has been one of the most popular carry trade pairs for decades. With US rates significantly above Japanese rates, traders collect over $14/day per standard lot. With 10:1 leverage, that translates to a theoretical 51.5% annual return on the margin deployed — assuming the exchange rate stays stable. The risk, of course, is a sudden JPY appreciation that wipes out the carry income with exchange rate losses.
Example 2 — AUD/CHF Carry Trade
- Position Size: $50,000 (mini lots)
- Long (AUD): 4.35% | Short (CHF): 1.50% | Leverage: 5:1
- Rate Differential: 2.85%
- Annual Carry: $1,425
- Monthly: $118.75 | Daily: $3.90
- Required Margin: $10,000
- Return on Margin: 14.25% per year
A lower differential but also lower leverage, making this a more conservative carry position. The Swiss franc has historically been a funding currency (low rates), while AUD benefits from commodity-driven interest rates.
Why Leverage Matters for Carry Returns
The carry income itself — $5,150/year per $100,000 notional — looks modest at 5.15% on the full position. But traders only put up the margin, not the full notional. At 10:1 leverage, that margin is $10,000, turning 5.15% into a 51.5% theoretical return on capital deployed. This is why carry trades are popular even at modest rate differentials: leverage amplifies the income significantly. However, the same leverage amplifies losses if the exchange rate moves against you.
The Carry Trade Unwind Risk
The greatest danger in carry trading is a sudden carry unwind. When risk sentiment deteriorates — during a financial crisis, unexpected central bank moves, or geopolitical shocks — carry traders rush to exit simultaneously. This creates a self-reinforcing cycle: selling the high-yield currency drives it lower, which causes more margin calls, which forces more selling. The August 2024 JPY carry unwind saw USD/JPY drop over 10 big figures in days, wiping out months of accumulated carry income for leveraged traders.
Frequently Asked Questions
A carry trade is a strategy where you borrow (sell) a currency with a low interest rate and invest (buy) a currency with a higher interest rate, profiting from the difference — the 'carry'. For example, borrowing Japanese yen at 0.1% and buying US dollars earning 5.25% gives a 5.15% annual carry income on the position size. Forex carry trades are expressed as currency pairs: going long USD/JPY means you are long USD (earning the high rate) and short JPY (paying the low rate). The income arrives daily via your broker's swap/rollover mechanism.
Brokers implement carry via overnight swap rates (also called rollover rates). When you hold a position past the daily rollover time (typically 5pm New York time), the broker credits or debits your account based on the interest rate differential between the two currencies, adjusted for their own markup. The credit is calculated on the full notional position, not just your margin. Swap rates are published in your broker's trading platform. Note that broker swap rates can differ significantly from central bank rates — always check your broker's current rates before assuming carry income.
The primary risk is exchange rate movement. Your carry income is fixed in percentage terms, but the exchange rate can move by far more than the carry differential in a short time. A 5% annual carry earn on USD/JPY can be wiped out by a 5% JPY appreciation in a week during a risk-off event. Additional risks include: sudden central bank policy changes that compress the rate differential, liquidity risk during carry unwinds, and leverage-amplified losses on the exchange rate move. Many traders use stop losses to cap exchange rate risk, accepting that this may cut positions during normal volatility.
Carry potential depends on the interest rate differential at any given time, which changes with central bank policy. Historically popular carry pairs include USD/JPY (long USD, short JPY), AUD/JPY, NZD/JPY, and USD/CHF. Emerging market pairs — such as USD/TRY, USD/BRL, or USD/MXN — offer very high differentials but carry significant political and currency risk. Always check current central bank rates: the RBA (Australia), RBNZ (New Zealand), Fed (US), BOJ (Japan), and SNB (Switzerland) are the most commonly referenced for carry trades.
Yes — leverage amplifies your return on margin significantly. Without leverage, a 5.15% rate differential earns 5.15% annually on your capital. With 10:1 leverage, you control $100,000 of position with only $10,000 of margin, so your $5,150 annual carry represents a 51.5% return on the $10,000 deployed. However, leverage also amplifies losses from adverse exchange rate moves. A 1% move against you on a $100,000 position costs $1,000 — 10% of your $10,000 margin. Risk management via position sizing and stop losses is essential in leveraged carry trading.
Sources
- Carry (investment) (Wikipedia)
- Kathy Lien, Day Trading and Swing Trading the Currency Market (3rd ed.) (Wiley, 2015)
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