Carry Trade: World’s Best

By bogotapost June 18, 2014

Colombia is giving the best return in the world to carry trade investors.


Carry trading, which involves selling currency with a low interest rate to buy currency at a high interest rate and capture the difference, has allowed investors to reap a 9.47 percent gain in Colombia over the past three months.

Colombia’s central bank recently lifted interest rates and the Colombian peso is currently appreciating more than any other currency. The country’s debt is making more than double the average gain for emerging currencies, with returns of 13.2 percent in US dollars.

In May, Colombia increased borrowing costs for the second month in a row to keep inflation down.

Analysts at BBVA recommend investors buy up Colombian bonds due in 2024.

“Colombia’s cycle calls for more rate hikes, opposite to a lot of these countries in the region,” Carolina Ramirez, a strategist at BBVA’s Colombia unit, said in a telephone interview with Bloomberg.

Deutsche Bank AG economist Armando Armenta told Bloomberg that he predicted the peso would strengthen 1.5 percent to $1,850COP to the US dollar over the next two months.

By Charlotte Ryan