Why Are JPY and CHF Considered Safe Haven Currencies?

During times of economic unrest, the Swiss franc is considered as a safe haven by the investors. Switzerland has a stable government, banking, and financial system. Switzerland economy has a low debt-to-GDP ratio and a current account surplus, and it has maintained a political neutrality.

The Japanese yen is also considered as a safe haven when the market is dominated by a risk-off sentiment. Japan has a current account surplus, as it exports more than it imports. Japan owns more foreign assets that it owes, and it is struggling with low inflation.

Both Switzerland and Japan are maintaining negative interest rates. So, you can use these currencies as funding currencies for carry trades. You can borrow the yen and the franc to buy higher yielding currencies like the Aussie and Kiwi.

So, watch out for the risk appetite in the market. If the risk-on sentiment starts to dominate, then the investments will flow towards the US dollar. If the risk-off sentiment is prevailing, then the Swiss franc and the Japanese yen will appreciate.

If you have any questions on the safe haven status of some currencies, you can ask them on our Forex forum.


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