"At this particular moment, it's not a market for carry trades," Felix Adam, from ACT Currency Partners in Zurich, told CNBC.com. "The market has completely changed since June 2007, the market doesn't want to take risks. We believe this environment will remain for the next year of two."
Higher inflation wreaked havoc among some of the emerging-markets currencies, pushing the South African rand, for example, near a five-year low against a weakening U.S. dollar recently and to an all-time low against the euro.
The Romanian leu, the darling of the carry trade until about a year ago because of its fast appreciation, high interest rates and an economy that was converging with the European Union, lost more than 10 percent against the euro since the summer.
Meanwhile, the euro and the yen keep appreciating against an ever-falling dollar, as the Federal Reserve looks set to use all its interest-rate ammunition to keep recession at bay while the European Central Bank, the Bank of Japan and the Bank of England take more prudent approaches.
"That really highlights the height of the crisis that we're in right now, that the low-yield currencies are benefiting so drastically from the shifting tides in both the US and Europe in terms of interest rates," Tom Hobson, technical analyst at Merrill Lynch, told "Power Lunch Europe."
There Is Still Hope
But not all carry trade hope is lost, some dealers and analysts argued. The Turkish lira, for instance, appreciated nearly 8 percent against the dollar since September.
"If anywhere, the carry trade is most relevant in Turkey, it has the highest real interest rate in the region," Simon Quijano-Evans, EMEA analyst at UniCredit MIB, told CNBC.com.
But those still wishing to take advantage of interest-rate differentials should proceed carefully, especially in Eastern Europe.
"It's clear that we're recommending investors to brace themselves for increased inflation in the region," Quijano-Evans said, adding that for the third and fourth quarter of the year "you'd probably position yourself for lower GDP, lower real income because of high inflation, lower export demand."
The Czech Republic, Poland and Slovakia have good fundamentals while in Hungary inflation is picking up and growth is weak, he said. And Romania's parliamentary elections later this year, as well as its budget deficit and current account gap, should rule it out of the carry trade.
But given some time, the tide will turn back again, some analysts say, and choosing carefully when and where to get in may bring opportunities.
"If a carry trade loses 20 to 30 percent, you have to look to see if it's a good carry trade again," Adam said. "The lower the interest rates go at home, people will go for yields abroad."
And the currencies of commodities-producing countries such as Australia and New Zealand, as well as Asian currencies, are likely to continue to provide good shelter from the falling dollar, some dealers said.
The euro-yen, sterling-yen, aussie-yen, are also still doing well, Alex Edwards, Senior Corporate Dealer at UK Forex Limited, told CNBC.com.
"I think the carry trade is going to continue, as long as New Zealand and Australia will be pushing rates higher," Edwards said. "I think investors have gotten used to this (recession) talk."