The Carry Trade Is Back and Bigger Than Ever, Goldman Says
Goldman Sachs says the currency carry trade has roared back after its 2024 blowup, reaching levels not seen in years.
Remember that wild summer 2024 market meltdown that had traders sweating through their keyboards? A big part of the blame went to the so-called currency carry trade — a popular hedge-fund strategy that spectacularly unwound and sent shockwaves through global markets. Well, it's back, and according to Goldman Sachs, it's bigger than it's been in a very long time.
If you're not familiar with the carry trade, here's the short version: investors borrow money in a currency with super-low interest rates (historically the Japanese yen has been a go-to), then turn around and invest that borrowed cash in higher-yielding assets elsewhere. As long as exchange rates stay relatively stable, you pocket the difference. Sounds great — until it doesn't, and everyone rushes for the exit at the same time.
Read more Bank Earnings Season Arrives With Financials Looking Cheap →
That's essentially what happened in 2024. The trade got crowded, conditions shifted, and the resulting unwind hit markets hard and fast. It was the kind of event that reminded even seasoned investors how quickly a "sure thing" can turn into a very bad day. The episode prompted serious questions about whether the carry trade would ever regain its popularity among big money players.
Apparently, the answer is a pretty emphatic yes. Goldman Sachs is now flagging that not only has the carry trade made a comeback, but its current scale rivals or exceeds what was seen before the blowup. That's a notable signal for anyone watching currency markets or trying to understand where hedge funds are placing their bets right now. Whether this resurgence ends more gracefully than the last one remains, of course, the multibillion-dollar question.
Continue reading at MarketWatch.com
