Safe haven currencies are often mentioned in the financial news or by traders around the world, but what are they actually? Understanding what is meant by safe haven currencies is not that complicated and in this article we will try to clarify it and give you a thorough explanation.
As always, if you have any doubts or concerns you can write a comment at the bottom of the article and we will be available to give you an answer as soon as possible.
What are the safe haven currencies?
Safe haven currencies are those currencies that the trader or investor prefers in times of economic or geo-political crisis. In a sense they are the equivalent of safe haven assets in Forex.
In fact, safe haven assets, such as gold, have the same function, which is to attract traders and investors in times of economic and financial crisis or turbulence.
The most popular safe haven currencies are the Swiss franc (CHF) and the Japanese yen (JPY). Why these two currencies?
Because they are adopted by economically stable countries, just like Switzerland and Japan. They are therefore coins usually subject to low volatility, as opposed to what happens for other currencies.
In the past, the euro was also considered a safe haven currency, but in recent years it has lost this function, also due to the economic crisis that hit the Old Continent with the debt crisis.
Another safe haven currency that is gaining momentum in recent times is the US dollar (USD). Many investors have chosen the US dollar and especially US Treasuries in times of crisis with North Korea or during talks for a US-China trade agreement. In fact, the dollar gained a lot of ground on the currency market in 2019.
Let’s now take a closer look at the characteristics of the two safe haven currencies par excellence: the Swiss franc (CHF) and the Japanese yen (JPY).
Swiss Franc (CHF)
The Swiss franc (CHF) is the currency of Switzerland, considered safe as the Swiss economy is one of the most stable on the planet.
A quite stable political system with a good cohesion between the various cantons, as well as the neutrality in case of war, make Switzerland a very secure country also from a financial point of view
The most common exchange rates for the Swiss Franc are the following:
- EUR/CHF – Euro/Swiss Franc exchange rate
- USD/CHF – US Dollar/Swiss Franc exchange rate
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Japanese Yen (JPY)
The Japanese yen is another safe haven currency that deserves special mention. Like Switzerland, Japan can also be considered an economically safe country.
Japan has a very high public debt, it is the highest in the world, but this is not a big problem. In fact, 90% of the public debt is in the hands of the Japanese themselves. This translates into a lower risk of speculative attacks.
In times of economic turbulence, the Japanese yen has experienced growth against the euro and the dollar, which confirms that it is a safe haven currency.
The most famous exchange rates with the Japanese yen are the following:
- EUR / JPY exchange rate – Japanese yen/euro exchange rate
- USD / JPY exchange rate – Japanese yen/dollar exchange rate
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