Dollar reversal could scupper EM carry boom, dealers warn
Surprise rate hike or a USD rally may force unwinds in popular emerging markets carry trades
Traders that piled into emerging markets currencies backed by borrowing US dollars could be at risk of a painful unwind if the greenback reverses course, foreign exchange dealers warn.
The EM FX carry trade has been one of the predominant consensus strategies among hedge funds, asset managers and pension funds, largely driven by extremely low levels of volatility and a prolonged period of weakness in funding currencies such as the dollar and yen.
The Bloomberg FX emerging markets carry index
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