In today’s briefing:
- Is Carry Driving the Returns of EM Currencies?
Is Carry Driving the Returns of EM Currencies?
- Given the strong performance of several Latin American currencies in recent days, it is fair to ask if these returns are being driven purely by their high carry.
- To address this question, we compare the performance of each currency, adjusted by its beta, with its carry, adjusted for its volatility.
- While there is some overlap between performance and carry, we find no strong correlation, leading us to conclude that we are currently not in a carry-trade environment.
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