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Carry Traders Reeling From US Dollar Surprises Look Elsewhere
Carry traders blindsided by bouts of dollar strength are looking beyond the currency to fund their bets -- even if it means giving up some returns. Borrowing dollars to buy assets in higher-yielding currencies, a usually profitable strategy in emerging markets, proved loss-making in the first quarter as U.S. yields surged. That pushed money managers including Fidelity International and AMP Capital to cut dollar-short positions and fund their arbitrage with euro or yen, given the low interest rates in those currencies. While that helped traders protect their carry returns, it also underscored the need to have a broad ... (full story)