UIP says the expected future spot rate equals today's forward rate, so holding a high-yielding currency unhedged should on average earn nothing extra. Decades of evidence show the opposite: high-yielding currencies tend on average to hold up or even appreciate for long stretches, then collapse abruptly.
That pattern, small steady gains punctuated by crashes, is the carry-trade return profile. The failure of UIP is often described as compensation for taking tail-risk.
Example: over a five-year stretch a 6% differential delivers roughly 5% a year of excess return, then a carry-unwind takes 20% out of the cross in three weeks, erasing four years of gains.
Related: carry-trade, carry-unwind, interest-rate-parity, tail-risk