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Carry Traders Are Using Weak Euro to Win Big in Emerging Markets

  • Shared currency boosts arbitrage as its sinks to dollar parity
  • Euro seen extending fastest slump since 2005 against greenback
The euro’s worst plunge since 2005 couldn’t have come one moment sooner for carry traders.

The euro’s worst plunge since 2005 couldn’t have come one moment sooner for carry traders.

Photographer: Nathan Laine/Bloomberg

For carry traders battered by the dollar’s rally and higher US borrowing costs, the euro’s worst plunge since 2005 couldn’t have come one moment sooner.

Investing in emerging-market currencies with borrowed euros is raking profits of as much as 29% this year depending on the choice of the higher-yielding currency, according to data compiled by Bloomberg. The gains are being driven by the euro’s 10% drop against the dollar, which took the cross to parity for the first time in two decades.