Carry Trade Losses Rise to Most in 2 Years Amid Europe’s Crisis
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Foreign-exchange losses from carry trades climbed to the highest level in more than two years as hedge funds and other large speculators unwound bets that the euro will strengthen amid Europe’s sovereign-debt crisis.
Royal Bank of Scotland Plc’s index for carry trades, whereby investors tap cash where borrowing costs are low to invest in higher rates elsewhere, fell 9.7 percent in November, the biggest drop since October 2008. The euro sank 6.9 percent in November against the dollar, the steepest monthly drop since May, as Ireland joined Greece in taking a bailout and North Korea shelled an island of its southern neighbor.