NEW YORK, March 27 Reuters An unusual calm enveloping foreign exchange markets is extending the life of a lucrative trade beyond what many had expected.

The socalled carry trade, which involves borrowing in a low interestrate currency to invest in a higheryielding currency, had been expected to fade as major central banks pivot away from hiking rates toward easing policy.

However, a major shift has yet to happen, keeping currency markets calm and the trade, which relies on such stability, an easy winner.

The carry trade is often known as picking up nickels in front of steam rollers, but speculators have been picking up bundles of 100 bills over the last year, said Karl Schamotta, chief market strategist at payments company Corpay.

The returns are outstripping virtually everything else.

The strategy provided bumper returns for those who played it right, a Corpay Global Payments analysis showed. Buyers of the highyielding Mexican peso who sold the Japanese yen would have reaped gains of about 44 over the last 12 months. Other popular carry currencies have also yielded similarly outsized returns.

A Deutsche Bank index, with elements that include the carry performance of 21 emerging market currencies, rose 6.6 in 2023, its best year since 2017. The DB EM FC Equally Weighted Total Return index, as it is called, has climbed nearly 1 over the last month.

The tide may be turning, however. Retreating inflation in emerging markets paves the way for central banks to ease…