What's the best pair to express a risk-off view?
When you expect fear, the choice of instrument matters: yen pairs, franc pairs, gold, or the high-beta crosses as the short side. Each expresses the view differently.
What's your pick?
- the instrument and the reasoning
- how it behaved in recent risk-offs
- the risk-off expression that failed you
Background: risk-on risk-off explained and safe havens.
Background: Safe-haven currencies: why the yen and Swiss franc rise in a crisis
When markets panic, money flows into a few currencies seen as safe. Why the yen, franc and dollar play that role, and when it breaks down.
Why is the yen a safe-haven currency?
Japan holds large foreign assets that tend to be brought home in a crisis, and the yen is widely borrowed to fund carry trades. Both lead to yen buying when markets fall.
What is a risk-off move?
A shift away from risky assets such as stocks and higher-yielding currencies, towards perceived safe havens such as the yen, Swiss franc, dollar and gold.
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