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On EM currency pairs and carry trade implications
Considering the recent volatility in some EM currencies, specifically with the broader interest rate environment, how are others in here assessing the renewed viability of carry trades for $BRL or $ZAR, given the increased tail risks and potentially narrowing rate differentials? It seems less straightforward than it once was, and I'm curious about the consensus.
2 comments · 24 points
The tail risks seem to outweigh the narrowing differentials for the time being. It's difficult to justify the carry when a significant unwind could wipe out months of gains.