Currencies That Go In Safe Heaven
Safe Heaven is literally known as a safe place when there is a dangerous situation. In general conditions for example, when a natural disaster or war occurs, Safe Heaven is a place that can be addressed to take refuge from the disaster.
Safe Heaven is not only defined as ” place ” specifically. Currently this term is also used as one of the terms in the investment world. The world of investing uses and recognizes this term as Safe Heaven Asset. Similarly, in common terms, Safe Heaven assets are also considered safe assets when adverse events occur in the investment world. Market turmoil usually occurs due to fundamental conditions such as geopolitics, inflation to natural disasters and war. If this has happened then investors will race to get out of adverse conditions. Furthermore, this investor will drop the option on Safe Heaven Asset.
Safe Heaven is expected to be a safe place for investment to survive and even increase asset value during times of market turbulence. Safer sanctuaries are sought by investors to limit their exposure to losses in terms of market decline.However, it should be noted that Safe Heaven is considered a protective asset in a market can be an investment that destroys other assets in the same market.Another thing to note is because the evaluation of the investment Safe Heaven varies then investors should conduct sufficient due diligence.
Breaking Down ‘Safe Heaven’
This currency investment diversifies the investor’s portfolio and is profitable in times of market volatility. Often times the market is in a state of up and down in a very short period of time. But did not rule out the market decline will last long as happened during the economic recession. When turmoil occurs then the market value of most investments will decline sharply.
Systematic events in this market can not be avoided so that investors seek and try to buy a non-correlated or heavily correlated Safe Heaven asset with the common market during these difficult times. While most assets fall then this currency can maintain or even increase its value. The assets that fall into this category are mostly commodities. However, some currencies included in the assets of Safe Heaven are:
CHF – Swiss Franc
In the forex market, Swiss Franc is considered the Safe Heaven currency. Given the stability of the Swiss government and its financial system make the Swiss Franc able to face strong upward pressures stemming from rising overseas demand. Switzerland has a large, secure and stable banking industry, a capital market with low volatility, almost no unemployment, high living standards and positive trade balance numbers.
The country’s independence from the European Union also made it more resistant to negative political and economic events taking place in the region. In addition, Switzerland became a tax haven for the rich. These wealthy people will take advantage of the state’s high security and anonymous banking features to avoid taxes and hide illegal funds.
The next currency included in this category is the currency of Japan, Yen. The reason is the economic policy and the Yen investor’s reaction to market turmoil.The current account in Japan is also experiencing a surplus because imports from foreign investment outside Japan are higher than those originating from the trade sector. So, it can be assumed that the stability of JPY is due to high income from the investment itself. When a bearish market occurs then Japanese investors will repatriate a certain amount of currency invested outside Japan.This makes the JPY value safe even going up. JPY concluded foreign investors as Safe Heaven currency.
Fujitsu Research’s economic observer Martin Schulz said Japan is a world banker and as risk rises, investors will look for safe banks. Until the quarter of 2018 JPY is still regarded as Safe Heaven. The potential for a trade war between the United States and China has reinforced the previous statement of Yen’s strength. The USD / JPY correlation with Yield is a pair of benchmark risk appetite in the market. In the future when market turmoil and government bond prices rise, even the US Dollar will lose value and exchange rate against the JPY.