I understand that Forward rate bias is the same as carry trade, but I can’t get my head around it using the logic below:

Covered IRP: F/S = (1+rx)/(1+ry); quoted as X/Y, Y is foreign currency.

If: F/S > (1+rx)/(1+ry), doesn’t it mean that Currency Y has forward premium? Forward rate bias states that we sell currencies trading at a forward premium. So in this case, why don’t we sell Y and buy X? The correct answer is to sell X and buy Y.

For example:

BRL/AUD spot rate: 2.1131

BRL/AUD forward rate: 2.1392

BRL 1-year interest rate: 4%; AUD 1-year interest rate: 3%.

F/S= 2.1392/2.1131= 1.01235

(1+Rbrl)/(1+Raud) = (1+4%)/(1+3%) = 1.00971

Thus F/S > (1+Rbrl)/(1+Raud)

I would think AUD is trading at a forward premium, thus we should sell AUD and buy BRL. But the correct answer is to short BRL. I feel that I got something fundamentally wrong. Could someone please help? Thanks!