【Expectations of a Fed rate cut rise, arbitrage traders increase bets on emerging markets】According to Golden Finance, spread trading is making a comeback among emerging market investors as the market bets that the Federal Reserve will begin cutting interest rates next month, leading to a weaker dollar and boosting interest in high-yield currencies. Asset management firms such as Neuberger Berman and Aberdeen Group are increasing their positions in currencies of countries like Brazil, South Africa, and Egypt. They believe that a weaker dollar and reduced volatility create a conducive environment for this strategy. In this strategy, traders borrow lower-yielding currencies to buy higher-yielding ones. Earlier this year, such trades had recorded double-digit returns, but paused in July due to the dollar's rebound. Recently, poor U.S. employment data has reinforced the market's expectation that policymakers will have to cut rates next month to avoid an economic recession, reviving interest in arbitrage trading. From DoubleLine to UBS, many institutions have recently joined the bearish dollar camp, stating that 'the bearish narrative on the dollar has resurfaced.' Neuberger Berman's co-head of emerging market debt, Urquidi, stated: 'The likelihood of a significant rebound in the dollar is very limited, and the overall performance of global economic growth remains robust.' He prefers to conduct carry trades in South Africa, Turkey, Brazil, Colombia, Indonesia, and South Korea. (Golden Ten)
