CoinVoice has learned that, according to Jin Shi reports, carry trades are making a comeback among emerging market investors as the market bets that the Federal Reserve will start cutting interest rates next month, leading to a weakening of the dollar and boosting interest in high-yield currencies. Asset management firms such as Neuberger Berman and Aberdeen Group are ramping up their positions in currencies from countries like Brazil, South Africa, and Egypt.
They believe that the weakening of the dollar and the easing of volatility have created a favorable environment for this strategy. In this strategy, traders borrow currencies with lower yields to buy currencies with higher yields. Earlier this year, such trades recorded double-digit returns, but paused in July due to the dollar's rebound.
Recently, poor U.S. employment data has strengthened market expectations that policymakers will have to cut interest rates next month to avoid an economic recession, driving a resurgence in arbitrage trading. From DoubleLine to UBS, many institutions have recently joined the bearish camp on the dollar, stating that 'the bearish narrative on the dollar has resurfaced.'
Urquhart, co-head of emerging market debt at Neuberger Berman, stated: 'The likelihood of a significant rebound in the dollar is very limited, and global economic growth is still performing relatively well.' He prefers to engage in carry trades in South Africa, Turkey, Brazil, Colombia, Indonesia, and South Korea. [Original link]
