Emerging Carry Trade Rebounds With Real, Rand Among Favorites

The emerging-market carry trade has bounced back from its Iran war losses as surging crude oil prices reinforce expectations that interest rates will stay elevated and bolster the currencies of commodity exporters.

An index tracking this trading strategy has jumped more than 3% from its March low, and gained about 1.7% since the conflict began in late February. The gauge approximates the carry trade by measuring returns from borrowing in three low-yielding currencies — namely the yen, Swiss franc and Chinese yuan — and investing in eight higher-yielding emerging market ones, including the Brazilian real and South African rand.