Dealer views mixed over future of profitable EM FX carry trade
Emerging market FX carry trades have generated 7.5% returns since April, but dealers question longevity
If the first half of 2025’s currency markets were characterised by record-breaking months of volumes and volatility, the back half of the year has been defined by a range-bound US dollar, promoting an environment for carry trades in emerging markets (EM), particularly in Latin America, to take off.
Positioning in these strategies normally builds when there is a sustained period of very low volatility. Carry trades involve borrowing in lower-interest-rate currencies to buy those that offer higher
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