Euro wreaks havoc on carry trades in unexpected rally

New York

IT WAS supposed to be so easy. Borrow in euros as the European Central Bank kept interest rates near zero and use the proceeds to invest in the economies where rates are higher, pocketing the difference and generating huge profits.

For a while it worked - that was, until about a month ago when global markets began to go haywire and the euro, instead of falling as almost every strategist surveyed by Bloomberg predicted, began to rally. Investors who embraced the carry strategy have seen losses of 3.5 per cent since March, according to a UBS Group AG index.