Why Politics Can be an Unwelcome Investor Distraction
Currency traders basking in the relative calm of August markets just received a jarring reminder of the dangers of chasing high yields. Recent flare-ups in political risk in emerging markets weakened their currencies and helped send returns on carry trades -- borrowing in locales with relatively low interest rates and investing the proceeds in places where they are higher -- tumbling from the highest in a year. Turmoil among South Africa’s political leadership prompted such a drop in the rand against the dollar this week that it cut the return on this quarter’s best carry trade in half from 10 percent. Manulife Asset Management Chief Economist Megan Greene discusses with Bloomberg's Anna Edwards on "Countdown."
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