Goldman Sachs says to avoid short USD for funding carry trades

Author: Eamonn Sheridan | Category: News

GS don't like the USD, but says to avoid it due to choppiness

Looks to fund carry trades (long EM) using other currencies instead of USD
  • dollar downside we expect will remain choppy
  • we prefer EM FX expressions that allow a steady accumulation of carry, have some scope for appreciation if the growth backdrop improves, and are somewhat insulated against a dollar back-up
  • On total return basis there has been a much more consistent trend of EMFX outperformance relative to non-U.S. DM currencies since 4Q 2018
  • EM FX relative to the USD has been volatile and range-bound  

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