Goldman Sachs: Currency Carry Trade Surges Back After 2024 Blowup
Goldman Sachs says the currency carry trade has roared back to multi-year highs, despite being blamed for a major market disruption in 2024.
The currency carry trade — a hedge-fund strategy that was widely blamed for triggering a massive market blowup in 2024 — has staged a dramatic comeback and is now larger than it has been in many years, according to Goldman Sachs.
The carry trade works by borrowing money in currencies with low interest rates and reinvesting those funds into higher-yielding currencies, pocketing the difference. When the strategy unwinds rapidly — as it did in 2024 — it can send violent shocks through global markets as traders rush to cover positions simultaneously.
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Goldman Sachs flagged the resurgence, signaling that institutional appetite for risk in currency markets has returned with force. The scale of the rebuild suggests traders have largely shrugged off last year's painful episode and are once again chasing yield differentials across global foreign exchange markets.
The revival raises fresh questions about systemic vulnerability. The same crowding dynamic that made the 2024 episode so severe — too many investors in the same trade — could again amplify any sudden reversal if interest rate expectations shift or a risk-off shock materializes. Analysts and risk managers have previously warned that carry trades can appear stable for extended periods before collapsing abruptly.
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