Volatility Stymies Asia Carry Even as Returns Rise, ANZ Says
Traders work on the trading floor of the Philippine Stock Exchange in Manila.
Photographer: Veejay Villafranca/BloombergElevated currency swings make carry trades unattractive in emerging Asia, according to Australia & New Zealand Banking Group, even with returns at the highest levels in nearly four years.
The strategy which involves borrowing in a low-interest-rate currency to buy a higher-yielding one, is getting fresh impetus in the region from elevated oil prices. A Bloomberg index of three-month forward implied yields for seven emerging-Asian currencies rose to 1.36%, the highest since June 2022, earlier this month. However, it also comes with a JPMorgan Chase & Co. index of emerging-market FX volatility last month hitting the highest in nearly a year.