 An arbitrageur executes an uncovered interest arbitrage strategy by exchanging domestic currency for foreign currency at the current spot exchange rate, then investing the foreign currency at the foreign interest rate, and at the end of the investment term using the spot foreign exchange market to convert back to the original currency.The risk arises from the fact that the future spot exchange rate for the currencies is not known with certainty when the strategy is chosen.For example, consider that an investor with $5,000,000 USD is considering whether to invest abroad using an uncovered interest arbitrage strategy or to invest domestically.