EM FX: the carry trade remain in demand - BTMU

Analysts at Bak of Tokyo Mitsubishi explained that the demand for carry trades continues to build There has been clear evidence of investors piling into carry trades during this week. 

Key Quotes:

"High yielding emerging market currencies such as the South African rand, Russian rouble and Brazilian real have strengthened sharply. The current external environment remains favourable for carry trades, and strengthening global growth is supporting higher commodity prices as well."

"It supports our outlook for commodity related currencies to outperform this year relative to more downbeat consensus expectations. However, there are tentative signs that the market could be getting carried away in the near-term. The rouble basket is now trading around one standard deviation too strong relative to the current price of oil according to our short-term valuation model."

"The price of oil would have to rise significantly in the coming months to make the rouble’s current strength appear more sustainable. The current strength of the rouble which is being boosted by carry demand could provide a trigger for the CBR to resume rate cuts earlier to dampen its relative yield appeal."

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.