Massive Global Carry Trade Unwinding Hits the ‘Super Peso’
- Implied volatility rises, hurting appeal for EM-carry trades
- Bullish positions start to weigh on the Mexican currency
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Carry traders are getting rid of their positions across emerging markets as funding costs increase and geopolitical risks boost implied volatility. Not even the Mexican peso, this year’s star currency, is being spared from the risk-off mood roiling global markets.
The “super peso,” the world’s best performing major currency since the end of 2016, is under pressure as traders ditch even their most profitable positions. The peso is among the worst performers on Tuesday, down as much as 1.7% as high-yield currencies are being dumped in favor of the dollar. The group includes the Brazilian real, the Colombian peso, the Polish zloty and the Hungarian forint.