Latest news with #InterestRateCuts
Yahoo
4 days ago
- Business
- Yahoo
Carry Traders Ramp Up Bets in Emerging Markets as Fed Cuts Loom
(Bloomberg) -- Carry trade is making a comeback among emerging market investors as bets the Federal Reserve's will kick off interest-rate cuts next month weaken the dollar and fuel appetite for high-yielding currencies. New York Warns of $34 Billion Budget Hole, Biggest Since 2009 Crisis Sunseeking Germans Face Swiss Backlash Over Alpine Holiday Congestion Three Deaths Reported as NYC Legionnaires' Outbreak Spreads A New Stage for the Theater That Gave America Shakespeare in the Park Chicago Schools' Bond Penalty Widens as $734 Million Gap Looms Money managers from Neuberger Berman Group LLC to Aberdeen Group Plc. are piling into currencies from Brazil, South Africa and Egypt, saying a weaker greenback and easing volatility make the environment ripe for the strategy, in which traders borrow in lower-yielding currencies to buy those that offer higher yields. The trade, which posted double-digit returns this year before hitting pause in July as the dollar rebounded, is now gaining steam again after a dismal US jobs report fueled bets policymakers will have to lower borrowing costs next month to avoid a recession. DoubleLine to UBS are among those who have joined a chorus of greenback bears in recent days, saying the dollar negative story is 'back in play.' 'The risk that the dollar has a big resurgence is probably very limited and growth still behaving relatively okay,' said Gorky Urquieta, the co-head of emerging market debt at Neuberger Berman, who favors carry trades in South Africa, Turkey, Brazil, Colombia, Indonesia and South Korea. Donald Trump's erratic policies have left traders scrambling to diversify their holdings, sending the US Dollar Index to its worst first half of the year since the 1970s. The shift, which comes after a decade of US outperformance, has pulled in cash to emerging market assets following three years of outflows. Global funds dedicated to developing-world debt have seen inflows every week for the past four months, with investors pouring in $1.7 billion in the week ended Aug. 6, according to a Bank of America Corp. note citing data from EPFR. An index of local bonds has returned more than 12% as 18 out of 23 main EM currencies have gained against the dollar this year. The appetite is such that the gap between gauges measuring expected volatility in emerging currencies versus their Group-of-10 peers over the next month is hovering around the highest in 12 years, signaling far less turbulence ahead for the developing world. Higher-for-longer The recent hawkish stance from some central bankers in emerging markets amid inflation and tariff concerns has further added to the appeal of carry trades. Over the past two weeks, Colombian policymakers surprised markets by holding borrowing costs at 9.25%; India also kept rates unchanged, opting for a wait-and-watch approach; in Brazil, which boasts some of the highest interest rates in the world at 15%, policymakers said they'll keep a cautious stance after Trump slapped the nation with a 50% trade levy. 'Carry is an important part of the story,' said Kieran Curtis, the head of emerging-market local currency debt at Aberdeen. 'The Brazilian real long is one of our favorite positions — and it's really driven by the yield.' Leveraged funds ramped up bullish bets on the Mexican peso to the highest in almost a year in the week ended Aug. 5, according to the latest data from the Commodity Futures Trade Commission. That covers the days following Mexico's central bank decision to slow the pace of monetary easing. Lower volatility in global markets, meanwhile, leaves the low-yielding Asian currencies adrift, according to firms from McKay Shields to BNP Paribas. Asian FX has an average carry of minus 1.1%, according to data compiled by Bloomberg — showing the cost of holding them is higher than the potential return from owning dollars. Latin American currencies have a carry of positive 3.7%, while European and African ones are positive 1.1%, the data show. 'In a risk-on environment, high carry trades typically do better,' said Gustavo Medeiros, head of research at Ashmore Group. 'So from that perspective, most likely the high carry Asian places like Indonesia, India, the large countries of course would do well, but LatAm is probably better positioned to benefit.' The Bloomberg Cumulative FX Carry Trade Index — which tracks the performance of eight EM currencies versus the dollar — has returned more than 10% this year. Some investors are paring risky bets to lock in those profits, saying Trump's tariffs may tank the economy and boost inflation in the US. A deluge of data due in coming days, including US inflation figures, as well as Russia-Ukraine talks, could bring fresh turmoil to global markets. For now though, carry trades appear to have more room to run. JPMorgan upgraded emerging-market currencies and local debt to overweight on Tuesday, citing the continuation of a weaker dollar trend after a month-long hiatus. 'If you're comfortable with the FX story — not necessarily that FX will continue to rally, but that we're not about to see an episode of resurgence of the dollar — then these trades look pretty compelling,' said Neuberger's Urquieta. What to Watch Thailand's central bank is expected to cut rates to support growth. A rate decision is also due in Peru China will release as swath of data including retail sales, and growth readings in Singapore, Malaysia and Taiwan are also due, which will help assess how Asia is weathering US trade policy Inflation readings in Brazil, Argentina and India will be in focus as traders gauge whether central banks will maintain a cautious stance amid Trump's tariff onslaught Growth data in Poland and Bulgaria may provide an insight into any spillover effects from European fiscal spending. An inflation reading in Poland is also due The Game Starts at 8. The Robbery Starts at 8:01 The Pizza Oven Startup With a Plan to Own Every Piece of the Pie Digital Nomads Are Transforming Medellín's Housing It's Only a Matter of Time Until Americans Pay for Trump's Tariffs Russia's Secret War and the Plot to Kill a German CEO ©2025 Bloomberg L.P. 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Yahoo
5 days ago
- Business
- Yahoo
Carry Traders Ramp Up Bets in Emerging Markets as Fed Cuts Loom
(Bloomberg) -- Carry trade is making a comeback among emerging market investors as bets the Federal Reserve's will kick off interest-rate cuts next month weaken the dollar and fuel appetite for high-yielding currencies. New York Warns of $34 Billion Budget Hole, Biggest Since 2009 Crisis Sunseeking Germans Face Swiss Backlash Over Alpine Holiday Congestion Three Deaths Reported as NYC Legionnaires' Outbreak Spreads A New Stage for the Theater That Gave America Shakespeare in the Park Chicago Schools' Bond Penalty Widens as $734 Million Gap Looms Money managers from Neuberger Berman Group LLC to Aberdeen Group Plc. are piling into currencies from Brazil, South Africa and Egypt, saying a weaker greenback and easing volatility make the environment ripe for the strategy, in which traders borrow in lower-yielding currencies to buy those that offer higher yields. The trade, which posted double-digit returns this year before hitting pause in July as the dollar rebounded, is now gaining steam again after a dismal US jobs report fueled bets policymakers will have to lower borrowing costs next month to avoid a recession. DoubleLine to UBS are among those who have joined a chorus of greenback bears in recent days, saying the dollar negative story is 'back in play.' 'The risk that the dollar has a big resurgence is probably very limited and growth still behaving relatively okay,' said Gorky Urquieta, the co-head of emerging market debt at Neuberger Berman, who favors carry trades in South Africa, Turkey, Brazil, Colombia, Indonesia and South Korea. Donald Trump's erratic policies have left traders scrambling to diversify their holdings, sending the US Dollar Index to its worst first half of the year since the 1970s. The shift, which comes after a decade of US outperformance, has pulled in cash to emerging market assets following three years of outflows. Global funds dedicated to developing-world debt have seen inflows every week for the past four months, with investors pouring in $1.7 billion in the week ended Aug. 6, according to a Bank of America Corp. note citing data from EPFR. An index of local bonds has returned more than 12% as 18 out of 23 main EM currencies have gained against the dollar this year. The appetite is such that the gap between gauges measuring expected volatility in emerging currencies versus their Group-of-10 peers over the next month is hovering around the highest in 12 years, signaling far less turbulence ahead for the developing world. Higher-for-longer The recent hawkish stance from some central bankers in emerging markets amid inflation and tariff concerns has further added to the appeal of carry trades. Over the past two weeks, Colombian policymakers surprised markets by holding borrowing costs at 9.25%; India also kept rates unchanged, opting for a wait-and-watch approach; in Brazil, which boasts some of the highest interest rates in the world at 15%, policymakers said they'll keep a cautious stance after Trump slapped the nation with a 50% trade levy. 'Carry is an important part of the story,' said Kieran Curtis, the head of emerging-market local currency debt at Aberdeen. 'The Brazilian real long is one of our favorite positions — and it's really driven by the yield.' Leveraged funds ramped up bullish bets on the Mexican peso to the highest in almost a year in the week ended Aug. 5, according to the latest data from the Commodity Futures Trade Commission. That covers the days following Mexico's central bank decision to slow the pace of monetary easing. Lower volatility in global markets, meanwhile, leaves the low-yielding Asian currencies adrift, according to firms from McKay Shields to BNP Paribas. Asian FX has an average carry of minus 1.1%, according to data compiled by Bloomberg — showing the cost of holding them is higher than the potential return from owning dollars. Latin American currencies have a carry of positive 3.7%, while European and African ones are positive 1.1%, the data show. 'In a risk-on environment, high carry trades typically do better,' said Gustavo Medeiros, head of research at Ashmore Group. 'So from that perspective, most likely the high carry Asian places like Indonesia, India, the large countries of course would do well, but LatAm is probably better positioned to benefit.' The Bloomberg Cumulative FX Carry Trade Index — which tracks the performance of eight EM currencies versus the dollar — has returned more than 10% this year. Some investors are paring risky bets to lock in those profits, saying Trump's tariffs may tank the economy and boost inflation in the US. A deluge of data due in coming days, including US inflation figures, as well as Russia-Ukraine talks, could bring fresh turmoil to global markets. For now though, carry trades appear to have more room to run. JPMorgan upgraded emerging-market currencies and local debt to overweight on Tuesday, citing the continuation of a weaker dollar trend after a month-long hiatus. 'If you're comfortable with the FX story — not necessarily that FX will continue to rally, but that we're not about to see an episode of resurgence of the dollar — then these trades look pretty compelling,' said Neuberger's Urquieta. What to Watch Thailand's central bank is expected to cut rates to support growth. A rate decision is also due in Peru China will release as swath of data including retail sales, and growth readings in Singapore, Malaysia and Taiwan are also due, which will help assess how Asia is weathering US trade policy Inflation readings in Brazil, Argentina and India will be in focus as traders gauge whether central banks will maintain a cautious stance amid Trump's tariff onslaught Growth data in Poland and Bulgaria may provide an insight into any spillover effects from European fiscal spending. An inflation reading in Poland is also due The Pizza Oven Startup With a Plan to Own Every Piece of the Pie Digital Nomads Are Transforming Medellín's Housing Russia's Secret War and the Plot to Kill a German CEO The Game Starts at 8. The Robbery Starts at 8:01 It's Only a Matter of Time Until Americans Pay for Trump's Tariffs ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Bloomberg
5 days ago
- Business
- Bloomberg
Carry Traders Ramp Up Bets in Emerging Markets as Fed Cuts Loom
Carry trade is making a comeback among emerging market investors as bets the Federal Reserve's will kick off interest-rate cuts next month weaken the dollar and fuel appetite for high-yielding currencies. Money managers from Neuberger Berman Group LLC to Aberdeen Group Plc. are piling into currencies from Brazil, South Africa and Egypt, saying a weaker greenback and easing volatility make the environment ripe for the strategy, in which traders borrow in lower-yielding currencies to buy those that offer higher yields.
Argaam
7 days ago
- Business
- Argaam
Gold futures hit record high above $3,500
Gold futures surged on Friday to a record high after a report that the US imposed tariffs on imports of gold bars. This also came amid hopes of US interest rate cuts. December gold futures rose 1%, or $35.70, to $3,489.40 per ounce, after touching $3,534.20—the highest level on record for the most active gold contract. Spot gold prices, meanwhile, slipped slightly by 0.1%, or $3.71, to $3,392.67 per ounce at 8:42 am Makkah time. The US dollar index—which measures the greenback's performance against a basket of six major currencies—fell 0.15% to 98.25 points. September silver futures gained 0.6% to $38.52 per ounce. Spot platinum prices fell 0.6% to $1,332.78, while spot palladium prices dropped 0.95% to $1,153.11. The price spread between New York futures and spot prices widened by about $100 after the Financial Times reported on Thursday that the US had imposed tariffs on imports of 1-kg gold bars, citing a letter from Customs and Border Protection. J.P. Morgan expects the Federal Reserve to cut interest rates by 25 basis points at each of its next four meetings, bringing the rate down to 3.5%. In a note issued on Aug. 7, J.P. Morgan said its forecast comes amid signs of a slowdown in both the labor market and the broader economy, Reuters reported.
Reuters
04-08-2025
- Business
- Reuters
British equities recover from Friday's selloff as banks rally
Aug 4 (Reuters) - Bank shares led British equities higher on Monday, rebounding from a sharp selloff on Friday, while investors looked ahead to the prospect of interest rate cuts by the Bank of England later this week. The blue-chip FTSE 100 (.FTSE), opens new tab rose 0.5% as of 0925 GMT, after logging its biggest percentage drop in almost four months on Friday. The domestically focused midcap FTSE 250 (.FTMC), opens new tab gained 0.6%. Shares in British banks (.FTNMX301010), opens new tab surged 2.1% on Monday after the UK's Supreme Court overturned a ruling on motor finance commissions, easing fears of a redress scheme that some analysts had warned could cost tens of billions of pounds. Lloyds Banking Group (LLOY.L), opens new tab shares jumped 7.4%, on track for its biggest daily gain in over nine years. Close Brothers (CBRO.L), opens new tab surged nearly 20%, while Barclays (BARC.L), opens new tab rose 2.3%. Aerospace and defence (.FTNMX502010), opens new tab gained 2.2%. Rolls-Royce (RR.L), opens new tab and BAE Systems (BAES.L), opens new tab were among the top gainers in the FTSE 100, up 2.7% and 1.8%, respectively. BP (BP.L), opens new tab rose 1.3% after the energy heavyweight said it has made its largest oil and gas discovery in 25 years in Brazil's Santos basin. Conversely, Convatec Group (CTEC.L), opens new tab fell nearly 2% after the British medical equipment maker said CEO Karim Bitar would take a medical leave of absence. Auction Technology Group's (ATG.L), opens new tab plunged 19.6% and was the top loser on the FTSE 250, after the online auction operator cut its annual profit margin forecast. On the radar this week, the Bank of England is widely expected to cut its key interest rate to 4% from 4.25% on Thursday and to lower it once more before the end of the year, despite consumer price inflation rising to close to double the central bank's 2% target in June. Meanwhile, a sharp downward revision to past U.S. jobs data on Friday, followed by President Donald Trump's decision to fire the head of Labor Statistics added an extra layer of nervousness among investors over the credibility of U.S. economic data.
