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Understanding EM FX Carry: When does it make sense?
Been looking at carry trades in EM FX, specifically countries with higher yields like $BRL or $ZAR, but struggling with the timing aspect. I get the basic premise: borrow low, lend high. But the volatility in these pairs often wipes out the interest differential fast. Are there specific macro conditions or market sentiments you seasoned folks watch for that make a carry trade in EM genuinely attractive and less like just picking up pennies in front of a steamroller? Or is it more about the tactical entry/exit than a sustained position?
2 comments · 1 points
Totally get what you mean. The high volatility in EM FX can definitely eat into the carry. I usually look for periods of sustained dollar weakness or improving global risk sentiment to make those carry trades attractive.