My answer to a question from an eClub member may help you understand how to use the Multicurrency Sandwich better. Here is his message:
Subject: Re: TIME FOR THE EURO?
This was interesting to read (despite the typos). What you should remember is the position where you are talking from. From a European viewpoint would not the best investment be a UK resident investing his/her £GBP in Euros because of the current strength of sterling. If that was borrowed money this could magnify the profit enormously with positive carry?
Please excuse the typo. We are getting close to conducing our first our first course here on the farm (for details go to https://garyascott.com/courses/ and we are hectic in our final efforts to have everything ready. We are building one more cabin and have just put in a new road, so I am spending most of my day, digging, cutting, hammering, laying gravel etc. Plus I still have to feed the dog and the chickens and harvest the crops so I'm rushed just a little more than usual. But I still want to still get these ideas out. Normally Bill Gates and his Microsoft spell checker take care of me. Somehow he and I both failed this time.
Positive carry means that a borrowed currency pays a lower interest than the invested currency. Right now pounds pay a higher interest than euros. Indeed it may be a good speculation to invest pounds into euro, but you are paying a price (the lower interest). If you can get 6% on a 100,000 pound CD and 4% on the equivalent in euros, it costs 2,000 pounds to speculate for the year. The euro has to rise more than 2% just to break even. The euro has to rise more than 2% for you to earn a profit.
On the other hand if you borrow $100,000 worth of Japanese yen at 1.5% and invest it in euro at 4%, you are paid the equivalent of $2,500 to take the speculation. That $2,500 is the positive carry. The yen must now rise 2.5% before you lose on your investment.
When using the multicurrency sandwich I always look to borrow a currency I feel is overvalued (as I do now with the yen) that has a low interest rate. I then look to invest in a currency I feel is undervalued. The problem with the euro is, as a new currency I have no basis to determine whether it is undervalued or not.
I hope this clarifies what positive carry is and that it helps bring you good investing!