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Is the surge in oil prices an 'accelerator'? Amidst the backdrop of conflict, commodity currency carry trades have seen their strongest start in three years.
The Middle East conflict has driven oil prices to multi-year highs, injecting strong momentum into foreign exchange carry trades. Carry trade strategies, such as borrowing in yen and buying currencies of oil-producing countries like the Brazilian real, have yielded returns exceeding 6% this year, marking the strongest start since 2023. Brazil's high benchmark interest rate of 15% and its advantage as an energy exporter have made it a preferred destination for capital inflows. However, institutions such as Citi have warned that the high uncertainty surrounding the conflict could lead to a sharp appreciation of the yen due to risk aversion, which might quickly erode carry trade gains.
Express News | Pan Gongsheng: China has no need and no intention of gaining trade competitive advantages through exchange rate depreciation.
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