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.
"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."