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Hedge funds ramp currency carry trades as returns reach 20-year highs

The strategy benefits from subdued volatility and resilient global growth, supporting borrowing in low-yielding currencies to chase higher returns in emerging markets.

Reported · Written up by our desk · Hedge Funds

Currency carry trades are drawing heavy interest from hedge funds as returns reach their strongest stretch in decades, with Bloomberg citing a report that highlights the trade setup.

The report attributes the surge to low market volatility and resilient global growth, which encourage investors to borrow in low-yielding currencies and rotate into higher-yielding emerging-market exposures.

As a result, carry trades are benefiting from both the funding side and the target-side return potential, contributing to returns at the high end of a multi-decade range.

The momentum is being framed as a response to the current risk backdrop, where investors see fewer volatility disruptions than in prior periods of the trade.

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