May 15 (Bloomberg) -- Currency deals that profit from the difference in interest rates globally are returning to favor on speculation the worst of the credit crisis may be over, spurring investors to buy eastern European assets, Deutsche Bank AG said.

The Russian ruble, Hungarian forint and Turkish lira offer investors the best returns in the next two to three months thanks to the highest rates in the region, said Angus Halkett, a strategist at Deutsche Bank in London.

The so-called carry trade, in which investors borrow in currencies with low interest rates to buy higher-yielding assets, helped the forint and lira surge to record highs last year before the collapse of Lehman Brothers Holdings Inc. prompted investors to sell riskier assets.

“In an environment where the dollar cash rates are near zero percent and euro money-market rates are at around 0.5 percent, carry is a huge incentive,” Halkett said in an interview yesterday. “Carry trades are returning as a good short-term solution.”

Turkey’s key interest rate is 9.25 percent, Hungary’s is 9.5 percent and Russia’s 12 percent. The cost of borrowing in euros overnight between banks reached 0.56 percent yesterday from 3.05 percent six months ago as the European Central Bank began cutting interest rates and pledges of international aid allayed concern the global slowdown would worsen. The London interbank offered rate, or Libor, for overnight loans in dollars fell to 0.22 percent from 0.4 percent in November as the U.S. government and the Federal Reserve spent, lent or committed $12.8 trillion to stem the longest recession since the 1930s.

Trade Idea

Deutsche Bank recommends investors sell the euro against the forint on bets the rate difference will help the Hungarian currency gain 10 percent to 260 per euro in two to three months from 286.55 today. Investors should also sell the dollar against the lira and buy the ruble against the dollar-euro basket, the bank said.

Deutsche Bank targets the lira at 1.4 against the dollar in two to three months, compared with 1.5617 today. Speculation that Turkey will sign a loan accord with the International Monetary Fund to help cushion the economy from a recession will also support the currency, Halkett said.

The ruble may gain to 36 against the basket made up of about 55 dollar cents and 45 euro cents per ruble, Deutsche predicted. The Russian currency traded at 37.2 in Moscow today.

The rally in eastern European currencies may reverse in the second half as a deepening slowdown in the region deters investment in higher-yielding assets, Halkett said.

To contact the reporter on this story: Ewa Krukowska in Warsaw at ekrukowska@bloomberg.net

Last Updated: May 15, 2009 11:11 EDT