China's Yuan Shock Gives Carry-Trade Crowd Worst Year Since '08
- Carry returns are flattened in emerging-markets rout
- China’s efforts to curb turmoil hurt key part of trade
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China just gave investors one more reason to shun the most popular trading strategy in the $5.3 trillion-a-day currency market.
Carry trades, or borrowing one currency cheaply to invest in a higher-yielding asset elsewhere, were already suffering the biggest losses since 2008 as the rout in emerging markets sent potential purchases tumbling. By cutting interest rates two weeks after its shock devaluation, China effectively crossed the yuan off investors’ shopping lists, too.