Hedge funds turn to exotics for EM carry trades

Traders eye dual digitals to cheapen up carry plays

Mexico, china currency

Dealers are seeing a resurgence in exotic foreign exchange options trading as hedge funds turn to cheaper structures to profit from emerging market carry trades.

FX carry trades have been among the most popular trades for market participants this year, with currencies such as the Brazilian real, Colombian peso, Hungarian forint, Mexican peso and Indonesian rupiah delivering significant returns.

The Bloomberg FX carry trade index, which measures the carry trade returns from eight emerging

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