Should the US dollar be used as a funding currency in the carry trade now?

Point Yes. The interest rate (Treasury bond yield) in the U.S. continues to be low even though the Fed has indicated hiking rates sometime next year. The U.S. dollar has been weaker against currencies like New Zealand dollar, Australian dollar and remains stable against most emerging currencies since the pandemic started last year. Therefore it will still be profitable to borrow in the U.S. and invest in other emerging currencies that offer high yields.

Counter-Point No. The interest rate in the U.S. is expected to go up soon once the Fed Reserve starts tapering the bond purchasing and hiking the interest rate by the end of this year. The U.S. dollar has stayed strong against major currencies such as euro, British pound and yen since the pandemic started last year. Therefore the U.S. dollar is not a good funding currency in the carry trade now.

Which one do you support? Offer your own opinion on this issue with data and statistics to support your opinion.