Markets Magazine
Here’s an FX Strategy That May Offer Refuge From Negative Rates
This leveraged Indian rupee risk-reversal has outperformed a plain forward carry trade over the past four years
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Searching for yield? Think about sending your money to Mumbai.
Investors in Europe and Japan seeking to escape negative interest rates may be able to get attractive carry-trade returns by parking funds in a number of emerging-market currencies. A carry trade typically involves borrowing money in a low-yielding currency and investing the funds in a higher-yielding one. Doing so can earn the difference between the two interest rates. The risk: Adverse FX moves—the currency you invest in depreciating against the one you borrowed in—can quickly wipe out gains, or worse.