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Safe Haven Currencies

Author

Listed:
  • Vessela Todorova

    (University of National and World Economy, Bulgaria)

Abstract

As other safe haven assets, safe haven currencies are sought by investors to mitigate financial risk when economic turbulence hits. Three major safe haven currencies are the US dollar (USD), the Japanese yen (JPY) and the Swiss franc (CHF). The euro is now in competition as an alternative safe haven currency. US dollar will remain the best safe haven currency in the short term and the best investment currency in the medium term. In every uncertainty of the US equity market as well as in the case of a decline of the US dollar, the investor may consider investing in a safe haven currency like the yen or the Swiss franc. Given the stability of Swiss government and financial system of the country, the increased foreign demand for the currency usually pushes the Swiss franc upward. There are number of factors, characterizing the dynamics in which the investors fall, rushing to the Japanese yen during periods of global risk aversion. Traders looked for refuge in the cryptocurrency because they cannot find refuge elsewhere.

Suggested Citation

  • Vessela Todorova, 2020. "Safe Haven Currencies," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 4, pages 579-591, December.
    • Handle: RePEc:nwe:eajour:y:2020:i:4:p:579-591
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    File URL: https://www.unwe.bg/doi/eajournal/2020.4/EA.2020.4.05.pdf
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    References listed on IDEAS

    as
    1. Gary Gorton, 2017. "The History and Economics of Safe Assets," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 547-586, September.
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    6. Habib, Maurizio M. & Stracca, Livio, 2012. "Getting beyond carry trade: What makes a safe haven currency?," Journal of International Economics, Elsevier, vol. 87(1), pages 50-64.
    7. Pierre-Olivier Gourinchas & Olivier Jeanne, 2012. "Global safe assets," BIS Working Papers 399, Bank for International Settlements.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

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    2. Aleksandr V. Gevorkyan & Tarron Khemraj, 2022. "Dominant Currency Shocks and Foreign Exchange Pressure in the Periphery," SCEPA working paper series. 2022-01, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    3. Beirne, John & Sugandi, Eric, 2023. "Risk-off shocks and spillovers in safe havens," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).

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    More about this item

    Keywords

    Safe Haven; Safe Haven asset; Safe Haven Currencies; Information Insentivity; Convenience Yield; Risk Aversion; Risk Spectrum; Safety Trap;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F3 - International Economics - - International Finance
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

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