07:26 AM EDT, 06/21/2024 (MT Newswires) -- The South African rand is gaining popularity in the carry trade market against the low-yielding Japanese yen, overshadowing the Mexican peso, Jefferies Financial Group said.

This shift is attributed to the May 29 election in South Africa that reassured investors of a more business-friendly government, while Mexico's political landscape has been less clear since Claudia Sheinbaum's victory on June 2, as some fear the leader could opt for "market-unfriendly reforms," Jeffries analysts said, as first reported by Bloomberg on Thursday.

Similarly, skepticism is growing around Brazilian President Luiz Inacio Lula da Silva's fiscal policies.

Investors who borrowed in Japanese yen to buy pesos netted a 63% return over the past two years. However, the appeal of the Mexican peso has declined recently, losing over 7% against the US dollar this month.

Although the peso regained some of its losses on Thursday after Marcelo Ebrard was named the new economy minister, the currency was the worst performer among the 23 emerging-market currencies tracked by Bloomberg, with the Brazilian real being the third worst.

Meanwhile, the rand hit its strongest level in 10 months against the dollar this week, reflecting investor confidence in the new government's "potential to implement market-friendly policies and drive growth," the Bloomberg report said.