Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Yen Reigns Supreme Over Franc as a Haven When Markets Get Messy

Forex Oct 15, 2018 02:10PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. Yen Reigns Supreme Over Franc as a Haven When Markets Get Messy

(Bloomberg) -- There’s only one trade to make in foreign-exchange markets when investors are running away from risk: buy the yen.

That’s the view of analysts at Citigroup Inc (NYSE:C). who compared the performance of the Japanese currency with the Swiss franc on days when the S&P 500 Index incurred losses of 2 percent or more. While Switzerland’s currency was clearly the better haven before the global financial crisis of 2008, the yen has “emphatically” taken the top spot since then, according to a note from analysts including Calvin Tse.

The yen certainly proved itself to be the stronger of the two last week. It surged by almost 1.4 percent against the greenback in a period that saw the American equity benchmark record two consecutive daily declines of more than 2 percent. The franc rose just 0.6 percent over the same period.

“With the outlook for market volatility to stay high going into the end of the year, more frequent bouts of risk aversion are likely to emerge,” the Citigroup analysts wrote. “There is only one standout safe haven currency to own.”

Citi’s analysis shows that when the epicenter of risk aversion is in Europe, the yen tends to outperform the franc, debunking conventional wisdom that the Swiss currency should benefit in such situations. For Asia-focused episodes, there is no clear bias between the two.

The analysts highlight several potential reasons for the yen assuming the mantle of top shelter from 2008 onward, including greater position short-covering for the yen, changes to Swiss banking regulations and the cheapening of the yen against the franc. They also pointed to a larger pool of Japanese assets abroad, which allows for greater repatriation than in the case of Switzerland.

Differences in central-bank FX policy are also key. The Bank of Japan has intervened in currency markets on just eight days since the crisis, while the Swiss National Bank has gotten involved on a regular basis in a bid to check franc strength, the analysts said.

“With the JPY being cheap, the Japanese having the largest private net international investment position in the world, and the BoJ taking a non-interventionist approach, there’s only one FX trade in risk off – you buy the JPY,” the analysts wrote.

Yen Reigns Supreme Over Franc as a Haven When Markets Get Messy
 

Related Articles

Dollar Edges Higher, Lifted by Safe Haven Demand
Dollar Edges Higher, Lifted by Safe Haven Demand By Investing.com - Jul 01, 2022 3

By Peter Nurse Investing.com - The U.S. dollar edged higher in early European trade Friday, trading close to the highs of the year on safe-haven demand as central banks take on...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email