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The Carry Trade Is Minting Big Returns in Latin America Again

  • Traders borrow at low rates, invest in higher-yielding nations
  • Goldman Sachs sees gains from buying Mexican, Chilean pesos

The carry trade is roaring back in Latin America, home to some of the world’s most aggressive inflation-fighting central banks. 

The steep jump in interest rates across the region -- from Chile to Brazil to Mexico -- has stood in stark contrast to the U.S. and Europe, where policymakers are still holding key borrowing costs near zero even as they move closer toward raising rates. That’s delivering big gains to a tactic that seizes on that disconnect: borrowing in the U.S. and Europe, then plowing the cash into countries where bond yields are significantly higher.