We have the following information the interest rate in the US, i$=2% the interest rate in Europe, i=4% the spot exchange rate S$/ = 1.1$/ the expected spot exchange rate in one year, E(S$/ t+1) = 1.1$/ We can make "carry trade" profits by:

Borrowing in US dollars and investing in Euros to earn the higher yield of the Euro.

Borrowing in Euros and investing in US dollars to earn an expected exchange rate appreciation of the US dollar.

Borrowing in US dollars and investing in Euros to earn both the higher yield in Euros and the expected appreciation of the Euro against the dollar.