What is carry trade and how it work?

give me sampe example

Carry trade is a popular trading strategy used in the forex markets that guarantees traders some return on their medium and longer term positions.

In the Carry Trade, speculators buy high interest currencies and sell currencies with low interest rates. These positions ensure that each trading day rollover-interest will be posted to the trader's account. Thus Carry Trade has the potential to significantly enhance a trader's return.

Carry trade works best under certain market conditions, and the selection of the currency pair can make the difference between a losing and a profitable trade. When selecting the currency pair, traders want to observe two things -- (1) the trader wants to make sure he is buying the currency that has the higher interest rate and is selling the currency that has a lower interest rate in comparison, and (2) the trader also wants to view the health of the economy for the currency pair to ensure the market will move to his/her favor.

Essentially, the trader will be buying a currency with a stronger economy and selling the currency with a weaker economy. Some currency pairs that are usually selected to apply the carry trade strategy are: GBP/JPY, GBP/CHF, AUD/JPY, EUR/JPY, CAD/JPY, and USD/JPY.

The carry of an asset is the return obtained from holding it (if positive), or the cost of holding it (if negative).

For instance, commodities are usually negative carry assets, as they incur storage costs, but in some circumstances, commodities can be positive carry assets as the market is willing to pay a premium for availability.

This can also refer to a trade with more than one leg, where you earn the spread between borrowing a low carry asset and lending a high carry one.

Carry trades are not arbitrages: they make money even if nothing changes, but things may change