Carry Traders Ramp Up Bets in Emerging Markets as Fed Cuts Loom

The carry trade is making a comeback among emerging market investors amid bets the Federal Reserve will kick off interest-rate cuts next month, weakening the dollar and fueling appetite for high-yielding currencies.

Money managers from Neuberger Berman Group LLC to Aberdeen Group Plc. are piling into currencies from Brazil, South Africa and Egypt, saying a weaker greenback and easing volatility make the environment ripe for the strategy, in which traders borrow in lower-yielding currencies to buy those that offer higher yields.