{"id":548251,"date":"2022-08-01T03:30:55","date_gmt":"2022-08-01T03:30:55","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2022\/08\/01\/emerging-market-investors-are-turning-to-the-eur-to-fund-carry-trades\/"},"modified":"2022-08-01T03:30:55","modified_gmt":"2022-08-01T03:30:55","slug":"emerging-market-investors-are-turning-to-the-eur-to-fund-carry-trades","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2022\/08\/01\/emerging-market-investors-are-turning-to-the-eur-to-fund-carry-trades\/","title":{"rendered":"Emerging-market investors are turning to the EUR to fund carry trades"},"content":{"rendered":"

<\/a> Move over, USD. The EUR is the new funding currency of choice for <\/strong>EM carry traders:<\/strong> Investors trading emerging-market currencies with borrowed EUR have seen as much as 29% gains this year as the EUR\u2019s fall against the greenback helps prop up some popular EM carry trades, Bloomberg<\/a> reports. The EUR has fallen 10% against the USD so far this year on geopolitical tensions and fears of recession, briefly reaching parity last month for the first time in decades. The greenback, meanwhile, has been on a tear this year due to rising interest rates and increasing market instability, and according to some gauges has reached record highs. This, coupled with rising yields, has eaten into gains on USD carry trades and turned to losses on most EM currencies.<\/p>\n

This has left the EUR looking attractive to EM traders:<\/strong> Though EM currencies have also been hard hit by the USD\u2019s ascent, many are continuing to hold their own against the EUR. Eighteen of the 23 currencies tracked by Bloomberg have risen against EUR since the start of the year, making them potentially profitable carry trades.\u201cFunding carry trades by selling EUR is becoming more common,\u201d said one currency strategist at Wells Fargo. \u201cThe EU looks more likely to fall into recession and geopolitical developments should weigh on the currency, making EM carry trades funded by the EUR an interesting option.\u201d<\/p>\n

Investors expect this to last through the year\u2019s end:<\/strong> \u201cIt doesn\u2019t look good for the EUR, in the second half,\u201d said Marek Drimal, strategist at Societe Generale. \u201cEven if the ECB surprises with another large hike, there are still substantial risks for the EUR before we see a turnaround.\u201d<\/p>\n

Want more on the carry trade?<\/strong> Enterprise Explains<\/a> has you covered.<\/p>\n

Oil prices are super-charging the Saudi economy:<\/strong> The Saudi economy grew at its quickest pace in more than a decade in 2Q 2022, according to preliminary estimates (pdf)<\/a> out yesterday. The economy grew at a 11.8% clip during the quarter on the back of heightened oil prices, which caused growth in the oil economy to surge 23.1% y-o-y. Non-oil GDP expanded at just 5.4%.<\/p>\n

Libya could help to calm oil prices:<\/strong> Libya\u2019s crude output has rebounded to 1.2 mn barrels per day, more than three months after protesters shuttered much of the country\u2019s oil industry<\/a>, according to Bloomberg<\/a>.<\/p>\n

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