Currency investors are rethinking carry trades, a popular strategy in which investors borrow in a currency with low interest rates and buy a currency with high interest rates, according to the Wall Street Journal. As central banks around the world lower interest rates, the gap that carry trade investors are counting on between low-yielding and high-yielding currencies has narrowed, cutting in the profitability of carry trades.
Investors are adapting to the change by using a wider variety of currencies and doing carry trades for shorter durations, instead of leaving them on for weeks or months.
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