ING: Spread trading may explode the summer market of emerging market currencies

The Zhitong Finance App learned that the Dutch International Group (ING) said that emerging market currencies are benefiting from the weakening US dollar. If the US cuts interest rates and attracts more capital to trade interest spreads, emerging market currencies may be further boosted.

Chris Turner (Chris Turner), head of foreign exchange strategy at Dutch International Group in London, and his colleagues said in a report on Tuesday that investors are speculating whether the trade deal between the US and Asia will involve exchange rate issues, and Latin American economies seem to have escaped the worst effects of President Donald Trump (Donald Trump) tariffs.

Dutch International Group said that the relatively high implied yields in markets such as Brazil and Mexico are proving attractive, as are the “high-risk, high-return” Turkish lira and South African rand. Dutch International Group added that although some countries (Romania in particular) are facing domestic political challenges, Eastern European currencies are reflecting the strength of the euro against the US dollar.

The exchange rate of most emerging currencies against the US dollar will rise in 2025

Turner said, “If the Federal Reserve actually starts cutting interest rates, and more importantly, if volatility stabilizes further, we will start hearing more news about dollar financing spread transactions.” “This is probably the story of this summer.”

Spread trading involves borrowing money from countries with relatively low interest rates and investing these funds in markets with higher interest rates, usually developing economies. This strategy, which is favored by investors in emerging markets, offers attractive returns, but in times of high volatility, this trade may close positions quickly.