Worst Logjam Since 2006 Traps Emerging-Market Traders in Losses
- Negative carry returns unusually coexist with volatility drop
- Fed holds key to unlocking value in year’s popular trades
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By all appearances, this is a great moment for a popular currency trade in emerging markets.
Swings in foreign-exchange rates are moderate and interest rates across much of the developing world are high, a perfect cocktail most of the time for fat returns in carry trades — transactions where investors borrow money cheaply in one currency and then funnel it into higher-yielding assets in another currency.