Another sign of the return of risk-takers to world financial markets: the revival of the so-called carry trade.

The carry strategy simply involves borrowing in countries with low interest rates to invest in countries with higher rates. The investor hopes to profit from the difference between the loan rate and the rate earned in the target country.

Bloomberg News reports:

Stimulus plans and near-zero interest rates in developed economies are boosting investor confidence in emerging markets and commodity-rich nations with interest rates as much as 12.9 percentage points higher. Using dollars, euros and yen to buy the currencies of Brazil, Hungary, Indonesia, South Africa, New Zealand and Australia earned 8% from March 20 to April 10, that trade’s biggest three-week gain since at least 1999, data compiled by Bloomberg show. Goldman Sachs Group, Insight Investment Management and Fischer Francis Trees & Watts have begun recommending carry trades, which lost favor last year as the worst financial crisis since the Great Depression drove investors to the relative safety of U.S. Treasuries. Now efforts to end the first global recession since World War II are sending money into stocks, emerging markets and commodities.

A straightforward carry-trade transaction, Bloomberg notes, would be to borrow U.S. dollars at the three-month London interbank offered rate of 1.13% and use the proceeds to buy Brazilian real and earn Brazil’s three-month deposit rate of 10.51%. That would net an annualized 9.38% -- as long as both currencies remain stable.