Latin America: New Frontier for Carry Trade Investors

Latin America has emerged as an attractive destination for carry trade investors in recent months, a strategy that seeks the highest interest rate differentials. The low volatility of emerging market currencies has facilitated operations benefitting from higher rates in Latin America and lower ones in developed markets. With the increase in oil prices, Latin American currencies have become even more appealing, offering significant returns compared to their peers globally. According to Chris Turner, global markets director at ING Bank NV, these countries are relatively protected against energy shocks due to their position as oil exporters, benefiting investors interested in carry trade strategies. Recent studies indicate that Latin American currencies were the most successful this year, with a strategy involving Colombian pesos registering a return of 21%, followed by real and Argentine peso returns at 12.7% and 12.6%, respectively. This trend reflects a reconfiguration of global investment strategies, shifting focus to regions offering higher yields and greater economic stability against external shocks.