Bloomberg: Yuan’s Peg-Like Stability Makes China Hottest Asian Carry Trade
China’s central bank has kept the yuan around 6.2 to the dollar for the past three months, helping make it Asia’s hottest carry trade.Stability breeds instability.
The currency hasn’t deviated more than 0.4 percent either side of that level since March 19, giving investors the confidence to borrow in lower-yielding currencies and to take leveraged bets in a market where the benchmark sovereign yield is 3.57 percent. The yuan has been the most attractive destination for such trades amid an emerging-market slump, according to the Sharpe Ratio, which measures returns adjusted for price swings. Offshore Chinese bonds are rallying.
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