Little they can do when the insto's and the hedge funds decide...

Little they can do when the insto's and the hedge funds decide to exit. Trumps tax cuts are now hitting the poorest, looks like the chance of US interest rate increases have just solidified. IMO 6-7% interest rates coming to mortgage here soon. I guess that's why our local banks are now asking whether you use 2 or 3 ply toilet paper when you apply for a mortgage.


https://www.bloomberg.com/news/arti...ging-market-carry-trade-can-only-end-in-tears
By Natasha Doff
30 May 2017

History Says Emerging-Market Carry Trade Could End in Tears

Investors reaping handsome returns on emerging-market currencies this year might do well to heed a warning once made by Harvard economist Jeffrey Frankel, who likened carry trading to “picking up pennies in front of a steam roller.”
Economic theory -- and history -- suggest the strategy of borrowing where interest rates are low to invest in high-yielding currencies is prone to the risk of a sharp reversal when too many investors pile into the trade.

Strategists at Bank of America Merrill Lynch warned last week that sentiment on emerging-market currencies is already reaching “exuberant levels.” Saxo Bank A/S’s chief currency strategist says now is the time to take profits.

Investors from BlackRock Inc. to Man Group Plc have poured money into emerging-market currencies this year to profit from interest as high as 12 percent compared with rates close to zero in the U.S. and European Union. The strategy has produced an average return of 7.5 percent since the beginning of the year, according to the Bloomberg Cumulative FX Carry Trade Index that tracks eight major currencies against the dollar.