Who can profit from covered interest arbitrage, and how? Ignore taxes and transaction costs. Japanese investors can profit by selling dollars in the forward market. No one can profit from covered interest arbitrage. Japanese investors can profit by buying dollars in the forward market. U.S. investors can profit by buying yen in the forward market. U.S. investors can profit by selling yen in the forward market. Intro The annual risk-free interest rate is 5% in the U.S. and 8% in Japan. The spot rate is $0.0093 per yen and the one-year forward rate is $0.0089 per yen