Capital flight shows more signs of easing... please let this mean a decline in the dollar. Please, please, please.
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April 14 (Bloomberg) -- The carry trade is making a comeback after its longest losing streak in three decades.
Stimulus plans and near-zero interest rates in developed economies are boosting investor confidence in emerging markets and commodity-rich nations with interest rates as much as 12.9 percentage points higher. Using dollars, euros and yen to buy the currencies of Brazil, Hungary, Indonesia, South Africa, New Zealand and Australia earned 8 percent from March 20 to April 10, that trade’s biggest three-week gain since at least 1999, data compiled by Bloomberg show.
Goldman Sachs Group Inc., Insight Investment Management and Fischer Francis Trees & Watts have begun recommending carry trades, which lost favor last year as the worst financial crisis since the Great Depression drove investors to the relative safety of Treasuries. Now efforts to end the first global recession since World War II are sending money into stocks, emerging markets and commodities.
“The global economy seems to have reached an inflection point,” said Dale Thomas, head of currencies at Insight Investment Management in London, which oversees $121 billion. “We’re set for a period of some classic risk currency trades, where you sell the dollar against emerging-market currencies.”
Carry trades use funds in countries with lower borrowing costs to invest in those with higher rates, allowing investors to pocket the difference. Speculators fled the strategy last year as central banks cut rates to revive growth, narrowing spreads, and as currency swings increased risks. Foreign- exchange volatility expectations surged 73 percent in three days to a record on Oct. 24, a JPMorgan Chase & Co. index shows.
http://www.bloomberg.com/apps/news?pid=20601109&sid=aKbFuB4RIpQo
