The strategy involves buying high-yielding currencies while selling low-yielding ones to capture the significant interest rate spread.
Citigroup reports that this approach yielded over 4% returns this year, marking a rare post-financial crisis peak for markets.
Australia and Norway now lead the pack with rates above 4%, attracting buyers away from stagnant, low-interest assets.
The Australian dollar surged nearly 9% recently, while the Norwegian crown gained 10% against the softening U.S. dollar.
Low currency volatility currently protects these gains, as stable exchange rates prevent price swings from erasing interest profits.
Even during recent global uncertainty, the Japanese yen failed to act as a hedge, further fueling carry trade momentum.
Strategic investors now use high domestic rates to hedge U.S. asset exposure, creating a new wave of currency demand.
This shift signals a remarkable comeback for yield-seeking traders who previously avoided developed markets for over a decade.
