Analyst Jeremy Boulton says rising market volatility has widened FX swings and
left carry trades increasingly fragile; adverse moves can erase
interest-differential gains and inflict larger losses. Since Fed September-hike
prospects firmed, popular carry currencies have moved sharply: Mexican peso down
as much as 9%, South African rand down more than 5%, Hungarian forint down over
7%. Japanese interventions have nudged the yen higher, while a French
bond-market rout dented confidence, weighing on the euro and lifting the Swiss
franc. The backdrop raises downside risk for carry positions; a further equity
pullback could trigger a collapse. With investors taking profits into year-end
and uncertainty ahead of the November US election, risk assets may face
additional pressure.
