Safe-haven currencies are currencies that tend to hold or increase in value during times of uncertainty and market instability or during economic and geopolitical turmoil. You may have heard a lot about the concept of “safe havens” and wondered what these currencies are and why investors are interested in trading and buying them, especially during times of crisis and turmoil.
Today we answer that question and explain the importance of safe-haven currencies and why they have become so popular over time and how to trade them in the forex market.
What does “safe harbor currency” mean
A safe-haven currency is a currency that is believed to be safe during geopolitical and economic turmoil. So when events such as natural disasters, wars, and stock market crashes occur in the stock market, investors and traders tend to buy safe havens, resulting in an increase in the value of safe haven currencies and a depreciation of the currencies associated with them.
The most important safe-haven currencies
The Japanese yen (JPY) and Swiss franc (CHF) are at the top of the major safe-haven currencies that have shown their strength and resilience in the face of the economic and geopolitical turmoil of recent years, with the US dollar lagging behind specific reasons that we will mention later in this article.
Why is the JPY a safe haven for investors
The Japanese yen is considered a safe haven for investors, driven by factors such as the following:
Current account surplus: Japan’s large current account surplus makes the country the largest creditor in the world
A strong economy that relies on industry and trade: Japan is one of the largest industrialized countries in the world The great demand of the countries of the world for trade with Japan increases the demand for trade in yen, which gives it shine and buoyancy even in the most difficult times .
The flexibility of the Central Bank of Japan towards foreign investors: The yen is considered an attractive currency for foreign investors, especially since the facilities of the Central Bank of Japan to lower the interest rate make investments more attractive compared to the expensive European and American banks with high interest rates.
Why is the Swiss franc CHF a safe haven currency
Liquidity: The Swiss franc has a high level of liquidity and tends to be stable.
Strong and stable economy: Switzerland has a very competitive business environment with low corporate taxes, a transparent economy and good business management in the past.
Switzerland’s neutrality: Switzerland is traditionally a neutral country and is therefore considered to be less prone to political unrest.
Huge gold reserves: The Swiss National Bank holds a large part of its gold reserves, which leads to an appreciation of the Swiss franc against the gold price.
Various reasons make the US dollar a safe haven currency
Despite the political and geopolitical turmoil and even the internal problems that the United States of America experiences on a regular basis, especially the ongoing skirmishes between President Donald Trump and the US Congress, which always threaten the impeachment of the president, as well as the ongoing ones United States external crises with China, Iran and even its neighbor Mexico. Even so, the US dollar remains a safe currency to be reckoned with.
The main reason the US dollar is a safe haven currency is because of the size of the US economy, including the widespread use of the US dollar in the world. The belief in the US dollar as a safe haven currency and the great liquidity it enjoys make the American currency a safe haven for investors.
How to Trade Safe-haven Currencies in the Forex Market
The safe-haven currencies are traded in the forex market through brokerage firms and banks with associated symbols such as USDJPY, EURJPY, USDCHF and others.
In a time of global turmoil and crisis, traders buy safe-haven currencies against other currencies, for example
Sell the USDJPY currency symbol (buy the yen)
Selling the currency symbol GBPJPY (buying the Japanese yen against the British pound)
Purchase of the currency symbol CHFTRY (the Swiss franc is bought against the Turkish lira)
Exness offers many currency symbols associated with safe-haven currencies such as: CHFJPY, USDZAR, CADJPY, USDCHF and many more different currency symbols.
Open a forex account with Exness and get started nowTrading symbols in safe harbor currencies on MetaTrader 4 and 5 platforms.