noob question about carry trade

Hi, everyone. Let me qualify this by saying I'm just starting with this forex stuff, and there's a lot I don't quite understand. In beginners' books, there's always a few paragraphs or maybe a chapter devoted to carry trade, and here in Japan, it's gotten a lot of press for driving the yen so high recently. (the unwinding of the carry trade, that is)
Now that I have an account, it sounds appealing and at least a little less risky than going for the intraday technical analysis plays most traders do. So I'd like to try it, but with interest rates dropping across the world, it's a bad idea, right? There are still currencies with fairly high interest yields. Like NZD or ZAR. So what if I say, went long on NZD/USD? (seeing how the Fed Funds Rate is nearly zero) Would the volatility or weakness of the NZD wipe me out? I was thinking however bad the New Zealand economy is, it can't be worse than the US one(could it?).

My own view is that the carry trade is just an advantage to your trade, but wudnt trade solely based on earning from the carry trade itself.
You would need deep pockets and even then you wud be risking it.
Lets say for example your buy a higher yielding currency so you earn the difference in interest. Then the higher yielding currency goes down in value againsts the currency you trade against, so you are loosing money, but still earning interest on daily basis. So you think that no matter what if you have to hold on to it for many months maybe even a few years your gna come out with a profit, well this wud be a very risky strategy. Why? because interest rates change and they cud change against you, so instead of earning interest daily you now loose it.

Shoku,

what Fry said is true- you should consider that interest rates could move against you, and New Zealand is facing debt problems, and low consumer activity. It's likely that NZ will continue to cut rates in the near future, but over time (unless something extraordinarily bad happens there) it will maintain a positive carry against Japan, and NZD/JPY should increase because of this. Now if you are investing and holding with 1:1 leverage then this is no problem. However, if you're doing leveraged, intraday trading, the tendency for the pair to fall rapidly due to risk aversion will kill you. For that reason I hope you do not use a short term, levered strategy. All the best for your trading!

Kris