Best Emerging Market Carry Trades Since Trump

Best Emerging Market
Carry Trades Since Trump
By www.ForexConspiracyReport.com

http://www.forexconspiracyreport.com/best-emerging-market-carry-trades-since-trump/
Goldman Sachs says that now is
the time to cash out your carry
trades on emerging market
currencies according
to Bloomberg.

Goldman Sachs told investors to
close out of an emerging-market
carry-trade recommendation it
made eight months ago, saying
there was little scope for
appreciation.

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Following the bank’s advice to buy
Brazil’s real, Russia’s ruble, India’s
rupee and South Africa’s rand
while shorting the Korean won and
Singapore dollar would have
delivered a 9.7 percent return,
strategists Marty Young and
Michael Cahill said in a note to
clients.

While Goldman Sachs is overall
positive on emerging-market
currencies, the analysts said the
real, ruble and rupee were unlikely
to strengthen much further in
coming months.

A graph shows the best emerging
market carry trades since Trump
won the presidency.

The Mexican peso which was
under such stress running up to
Trump’s election has done the best
of all as Trump’s promises to shut
down trade and make Mexico pay
for things has come to naught.

Although the list of currencies has
done well in the months since
Trump’s election which currencies
will be good for carry trades going
forward?

The Goldman Sachs strategists
said Mexico’s peso, Turkey’s lira
and South Africa’s rand are now
the most attractive carry-trade
currencies.

Amid currencies with lower yields,
the bank said there is appreciation
potential for Peru’s sol and
recommended the Polish zloty and
the Czech koruna against the
euro.

There are two factors with a carry
trade.

One is that you want your money
in a currency that will appreciate
and two is that you want your
money in a currency with a higher
interest rate.

You can make money with just one
of these factors but it has to
outweigh the other.

The best emerging market carry
trades since Trump have all had to
do with currency appreciation
versus the dollar which may well
continue as Trump’s economic
plans seem to be going nowhere.

Economic Growth and
the Dollar

We wrote recently that the USA
will not hit Trump’s economic
growth target.

Incoming administrations
commonly attempt to stimulate the
USA economy to produce more
jobs and more economic growth.

The promise of growth then
supports the budget increases that
they wish to enact.

In Trump’s case he wants to
dramatically increase defense
spending and has promised tax
cuts, infrastructure stimulus
spending, reduced regulations and
repatriation of offshore corporate
cash.

These wishes may or may not
become reality.

But, even if they do, how much of
an increase in economic growth
will occur?

Bloomberg reports that the IMF
calls Trump’s growth target
unlikely and cuts their projection
for US GDP growth for both 2017
and 2018 to 2.1%.

In regard to Trump’s economic
plans there is the issue of whether
or not any meaningful legislation
will be enacted and then there is
the issue of whether or not
enactment will lead to the desired
results.

Priming the pump, deficit spending
or tax cuts to stimulate the
economy

are part of the same argument that
if the government just gets out of
the way the economy will blossom
and generate enough revenue
despite lower tax rates to pay all of
the bills and reduce the budget
deficit.

In the Reagan years the working
population grew in part because of
the greatest surge in immigration
in a hundred years.

Today Trump wants to close the
borders to trade and immigrants.

That is not a recipe for a stronger
economy or a stronger dollar.

As such there are likely to be more
and more good emerging market
carry trades against the dollar so
long as Trump is in charge.

Best Emerging Market Carry Trades Since Trump

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