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Carry-trade choice for emerging markets shifts to euro from yen

Analysts expect the yen to strengthen 2.7% by next June - doing the best among 16 major peers - while the euro is forecast to weaken 2%

Published Sat, Dec 10, 2016 · 5:50 am
For Oanda senior market analyst Jeffrey Halley, the euro is better than the yen because Japan may have already reached the limits of quantitative easing as it seeks only to manage its yield curve, putting pressure on the currency to strengthen.

Yen

INVESTORS are starting to shift to the euro from the Japanese yen when they consider funding carry trades in emerging markets, as prospects for political turmoil in the European Union hang over the shared currency.

Carry trades involve borrowing in low-yield currencies and then buying higher-yield ones to earn the rate premium differentials. Dollar-funded strategies have suffered after Donald Trump was elected US president on Nov 8. Borrowing the greenback and buying the currencies of Brazil, Indonesia,...

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