Lower swings are said to be reviving carry trades, with Latin American currencies reportedly offering the strongest return potential.
Emerging-market currency volatility has reportedly dropped to its lowest level since January, a shift that is said to be making carry trades more attractive again. That strategy involves borrowing in a lower-yielding currency and investing in a higher-yielding one to capture the interest-rate gap, though returns can be quickly eroded by exchange-rate moves. Latin American currencies are reportedly leading on return potential as calmer market conditions improve the appeal of yield-focused positions.