Safe haven currencies:where money runs to.
Safe haven currencies are where money goes when investors get scared: mainly the Japanese yen, the Swiss franc and the US dollar, with gold as the classic safe asset.
On a risk-off day, they move together, and against the commodity currencies.
Why these currencies
Deep markets, stable institutions and, for the yen, the unwinding of carry trades. When fear rises, investors bring money home or into the safest assets.
How to use it
When Risk Sentiment turns risk-off, safe havens are the side to favour and commodity currencies the side to avoid.
Use it in real trading
The tool informs the decision, it never makes it. Here is how it plays out on real trading days.
A sharp sell-off in stocks. You favour yen longs against the Aussie.
The dollar falls in a risk-off move because the fear is about the US itself. Check the story before assuming.
Mistakes to avoid
- Buying safe havens on every red day.
- Assuming the dollar always acts as a safe haven.
- Ignoring the reason for the fear.
What makes it different
The Risk Sentiment tool and the heatmap show in seconds whether safe havens are in demand.
Questions
Is the dollar always a safe haven?
Usually, but not when the US is the source of the fear.
Why the yen?
Deep markets and carry trade unwinds.
Is gold a safe haven?
Often, but it also reacts to yields and the dollar.