HOUSE OF CARDS
However, if all the investors begin cashing out their investments and return their money to their local currency, the NZD would fall, because they are essentially selling NZD to buy their local currencies. For an example, see Figure 3.3
This is an example of how fragile the carry trade can be. The NZD lost almost all the value it gained in one entire year in just one month. The NZD has fallen in value, not because the New Zealand economy is in trouble, but because investors are removing their deposits ... mostly to cover losses in other financial investments, such as the U.S. subprime debacle.