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Feb 16
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LONG
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Mitul Kotecha
Head of FX & EM Macro Strategy, Barclays
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EM currency volatility has been below DM volatility for nearly 200 days. Inflows are hitting local currency bond markets. In a "yield-starved" world where the Fed is slow to cut, investors seek carry. Latin American currencies offer high carry (high interest rates) combined with historically low volatility, creating a superior risk-adjusted return compared to low-carry Asian currencies. LONG High Carry EM (LatAm) vs. Low Carry DM. A sudden spike in the US Dollar or a global risk-off event would spike volatility and unwind the carry trade rapidly. |
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