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Source: Financial Times
By: Benedict Mander

Shortly after interest rates in Argentina were unexpectedly raised by 150 basis points to 26.25 per cent last month, a joke began to circulate on Twitter with a picture of Federico Sturzenegger, the central bank governor, above the caption: “Keep calm and carry trade”. The adaptation of the British wartime slogan was apt. The “carry trade”, where investors borrow at lower interest rates in one currency to invest at higher rates in another currency, has been raging in Argentina since a pro-market government led by President Mauricio Macri freed up capital flows after taking power in December 2015. Today there is almost $27bn invested in central bank debt instruments that mature in 30 days or less, investors’ favourite vehicle for the carry trade. “Over the course of the last year, Argentina has certainly been one of the juiciest carry trades in emerging markets,” says Patrick Esteruelas, global head of research at Emso Asset Management in New York.