The oldest trick in the currency trader’s playbook is working better than it has in almost two decades. Dollar-funded carry trades, where investors borrow in US dollars and park the proceeds in higher-yielding emerging-market currencies, have strung together their longest winning streak since 2008.
The numbers behind the streak
Bloomberg’s eight-currency index tracking these trades posted an 18% gain in 2025, the strategy’s best annual performance since 2009. To put that in perspective, an 18% return on a currency carry trade is the kind of result that usually only shows up when everything breaks right: wide interest-rate differentials, calm markets, and a weakening funding currency.
The momentum has carried into 2026. As of late January, the index was already up 1.3% year-to-date.
Perhaps the most striking data point is the volatility picture. Emerging-market currencies have exhibited lower volatility than G7 currencies for nearly 200 consecutive days, a streak that, if maintained, would be the longest since 2000.
