Carry Trades Are Back in Focus, Especially for Indonesia’s Rupiah
- Indonesian currency has highest carry-to-risk ratio globally
- Drop in market volatility boosts allure of high yielders
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Carry trades are back in focus, thanks to the Federal Reserve’s pledge to keep interest rates near zero, and the Indonesian rupiah is emerging as the most attractive currency.
The rupiah offers the highest risk-to-reward ratio for the strategy among 32 exchange rates analyzed by Bloomberg. This is followed by the Turkish lira and the Indian rupee, according to calculations which use the dollar’s London interbank offered rate and yields implied in foreign currency forwards.