Carry trades funded by the dollar hit longest winning streak since 2008

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. Why the dollar became everyone’s favorite piggy bank Major institutions have piled in. Morgan Stanley and Bank of America have both pointed to favorable macroeconomic co...