Fairly obvious – at the moment, investors, rather than traders, need something that isn’t going to go down the pan – if the future is uncertain, and more importantly, with news events coming in thick and fast, making it impossible to make any sensible long-term decisions, what do you do? Give up and head for the nearest safe haven.

Any major traded currency, for example USD or CHF, is going have a natural inbuilt advantage.

The Yen takes off
At present JPY the Japanese yen is becoming a safe haven – ironic, because for Japan’s internal economic reasons they’d rather it didn’t rise too much – see also the carry trade.
For the last 10 years or so, the yen has been very low-yielding, so other, riskier investments have been funded by selling this currency. Now there’s a rush to get out of these riskier investments and therefore back into the yen – which has started to shoot up. No doubt the Bank of Japan is intervening even now to keep things steady.

So this why, in strategic terms, we’ve been seeing this kind of activity on our forex charts for the last couple of months. The dollar strong against nearly all currencies, GBP, CAD struggling and the forint and rupiah dropping off the edge.The Swiss franc hasn’t been doing so well recently, certainly against the dollar, for more subtle internal reasons.

Solid Gold
Gold is the traditional safe haven investment – it will hold its value, the market can’t be cornered, despite the odd attempt, and demand is stable and also relatively small component of the market price. If you feel like something really exotic, stuff like rhenium might start to take on an importance – but that’s a long way ahead…

Stuff we always need
Food and death – even in a recession, you gotta eat something. Staple food manufacturers will be relatively unaffected, Wal-mart – food manufacturers specializing in luxury items, obviously, they’re going to struggle. Maybe check out undertakers, people still die – although there’s been a displeasing lack of bankers on window ledges this time round.

One Response to “Safe Haven Currencies and the Forex Market”

1. Forex » Safe Haven Currencies and the Forex Market says:

   November 24, 2008 at 8:43 am

   If the future is uncertain, and more importantly, with news events coming in thick and fast, making it impossible to make any sensible long-term decisions, what do you do? Give up and head for the nearest safe haven. [...]

   Reply