Carry Trade's Struggles Have One Analyst Saying Do the Opposite
- Strategy set to extend underperformance, BofA’s Leng says
- Other observers expect rebound for carry will continue
Photographer: Sanjit Das/Bloomberg
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The outlook for one of the most popular currency-trading strategies is in doubt, even after a two-week rebound, so one analyst says investors should consider the reverse approach.
The carry trade, where investors borrow in low-yielding currencies to buy assets where rates are higher, has pared its loss for the last year to about 6 percent, according to a Deutsche Bank AG index. Nonetheless, the potential for volatility ahead means the strategy is likely to underperform and possibly unwind, according to Alice Leng, an FX strategist at Bank of America Corp.