What is Negative Carry Pair?

A Negative Carry Pair is a trading strategy used on the forex markets in which a trader or investor holds a long position on the currency of a country with low interest rates and also shorts the currency of a country with high interest rates. This trading strategy initially incurs a loss because of the payment out for the short position will be more than what is gained for the long position. When a trader is willing to create a negative carry pair it normally means that the trader is confident that the currency with the lower interest rate will experience some very strong positive economic activity.