Expectations that the Federal Reserve will keep its easy-money program in place into 2014 have created the "perfect" environment for a revival of the carry trade, say foreign exchange strategists.
"We have conditions that are perfect - low volatility [and a] low interest rate environment. It means that currency traders are going to be looking for risk, high beta and interest rate differential trades," said Peter Rosenstreich, chief foreign exchange analyst at Swissquote Bank.
(Read more: March 2014 most likely date for tapering: Goldman)
There is already evidence of increased carry trade activity since September 18, when the U.S. central bank surprised markets with its decision not to taper its asset purchases, say market watchers. A carry trade is when investors borrow in a low yielding currency, such as the yen, to fund investments in higher yielding assets somewhere else.