Emerging-Market Carry Trade Surges 18% YTD, Best Start Since 2005
An emerging-market carry strategy funded in euros has returned +18% year-to-date, marking its strongest start to a year since 2005, while a G10 carry basket gained 8% amid low currency volatility and surging risk appetite.
An emerging-market carry trade that borrows in euros to invest in higher-yielding currencies like the Brazilian real, Colombian peso, and Turkish lira has surged +18% year-to-date, its best first-half performance since 2005.
A G10 carry strategy, funded in currencies such as the euro, Danish krone, and Swiss franc to buy the New Zealand dollar, Norwegian krone, and Canadian dollar, has returned +8% over the same period.
Unusually low currency volatility and a resilient global economy—despite oil price shocks linked to Iran—have encouraged investors to continue adding exposure to carry trades. Risk appetite in foreign-exchange markets is surging.
Source: The Kobeissi Letter