Emerging markets have been seeing higher returns of late due to weaker FX markets and favorable conditions against the US dollar. Interest rates have been high in developing countries, leading to high profits in the freight trade.
Borrowing the U.S. dollar and yen to buy the Brazilian real, Mexican peso and Hungarian forint topped the S&P 500’s annual rally, with a sharp fall adding to interest in other gains.
The JP Morgan Global FX Volatility Index, which measures volatility over a three-month period, recently has changed to +8.86% week.for the first time the index will be below 9% since before Russia invaded Ukraine in 2022.
“This is a sign that interest rates are turning to lower levels,” said Simon Harvey, Head of FX Analysis at Monex Europe Ltd. A larger-than-expected interest rate hike or an upward review of terminal prices is too low. And this price drop is affecting the financial markets. “
Currently, the one-month strategy of buying the Hungarian forint and selling dollars has yielded 17.5% year-on-year, including sales costs. These are some of the best liquid solutions. Similar strategies using the Mexican peso and Brazilian real have produced annualized returns of 17.2% and 14.3%, respectively.
The Mexican peso has come a long way the strongest level since 2017, and the stability of the US economy, moving closer to remittances are among the factors that have helped. Throughout Latin America, countries raised interest rates earlier than the US Federal Reserve and may soon lead to rate cuts, writes Bloomberg Opinion’s John Authers.
Use Bloomberg’s IN and FXFA tools to monitor the flow of funds, and calculate the amount paid. Run FXSW to review multiple currency exchange strategies.
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