Explain how yield curve positions are taken across more than one currency

Yield curves in different countries reflect each economy's monetary policy, inflation and growth, so a manager may overweight the market where yields are expected to fall most or trade relative slope. In base-currency terms, return is roughly the local bond return plus the currency return. If the currency is hedged with forwards, covered interest parity means the hedged return is roughly the local return plus the short-term rate differential (domestic rate − foreign rate), so hedging gives up much of a high-yield market's extra yield. Carry trades that borrow in low-rate currencies and invest unhedged in high-rate ones are a bet that uncovered interest parity fails. The trap is comparing unhedged yields across markets as if currency were irrelevant.