Emerging-market (EM) carry trades, some of this year¡¯s most popular foreign-exchange bets, are showing resilience even after a joint U.S.-Japan currency intervention dented the appeal of this yen-funded strategy.
The Bloomberg EM FX Carry Risk Premia Index has fallen about 1% since Japan used direct action to bolster its currency, about the same as a similar benchmark for leading currencies. That¡¯s a far cry from the 4% the EM carry measure fell in August 2024, when a sharp yen rally roiled global markets as traders rushed to repay their yen-denominated borrowings.
The muted response has eased fears of a repeat of the 2024 blowup, and shows that investors have diversified away from the yen, tapping currencies such as the euro and the Swiss franc to finance purchases of high-yielding assets in emerging markets.
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