💱🔻Carry Trades Have Been Posting Losses Since FOMC: Cable FX Macro

• Basket of carry trades is posting sharp losses on Thursday session; looking more broadly, the underperformance is tracking since the September FOMC rate decision, when the Fed decided to hike rates by 25bps. Today, the Mexican peso, the Hungarian forint, and the South African rand gave up more than 1.0% to the dollar. Losses were not isolated to these currencies; other EMFX were trading soft on Thursday.

• What is worth noting is that the peso, the rand, and the forint have been benchmarks to the latest carry trade cycle in foreign exchange. It is fair to say there is a broad unwind, as all three currencies have been posting losses since the Fed tightened policy.

• The reversal of the carry trade is confirmed as the Swiss franc and Japanese yen outperform the G10FX on Thursday; the former has been a popular funding currency to bet on high-yielders.