China’s Yuan a Standout Funder for Emerging-Market Carry Trade

From bnnbloomberg.ca

The historic end to super-easy monetary policy in Japan and a surprise rate hike in Taiwan have strengthened the yuan’s appeal as a funding currency for the global emerging-market carry trade. Investors are reassessing their strategies after a pause in the stellar run of dollar-funded trades amid signs the Federal Reserve may not ease as aggressively as previously anticipated. Carry traders borrow in low-yielding countries to invest in higher-yielding assets, often in emerging markets. An ideal funding currency is characterized by low volatility and limited scope to strengthen. While the yen remains the world’s ... (full story)