Safe Haven Currencies Facts
Also known as hard currencies or conservative currencies, safe haven currencies are from the countries with stable economies, which ensures that their currencies do not fluctuate too much in value. Large and more conservative economies usually have such safe currencies.
Here’s a list of facts:
» Known as hard currencies - They are also termed hard currency; just like the adjective, they are not easily subject to various changes. Particularly, they indicate a status that includes a country’s fiscal outlook, a country’s political condition, a country’s central bank policy posture, as well as long-term stability when it comes to its purchasing power.
» Popular in uncertain markets - They are popular in a market that shows a high level of uncertainty; they are associated with countries that operate major trade surpluses. Conversely, they are almost unknown in a strong market.
» Low-yield currencies - Examples of such currencies include Japanese Yen (JPY), Swiss Franc (CHF), United States Dollar (USD), and other low-yielding currencies.
» Conservative currencies - They are considered conservative currencies; they enable traders to move their capital once they get a hint that their investments are in a risky position.
» Safe haven investments - Even expert traders invest in such currencies not to use them actively and instead, to preserve money. This creates safe haven for their investments.
» Reduce investment risk - Investing in such currencies is a tactic of rich traders. Since the values of the monetary units may barely change over time, they reduce their risk of losing wealth via other currencies’ possible depreciation.
» Reduce chance of currency re-valuation - With them, a trader can lower the probability of a single country to sharply re-value a currency.
» Preferred investment during times of crisis - Many beginner traders, as well as ordinary people, prefer such currencies during specific periods; included in the list are times of increased military and political risk, times of heightened inflation, and times of unreasonable government-imposed rates.
» Spot profitable moves - They also serve as a means for a trader to spot the most profitable moves, as well as the right time to set entry and exit points, in a trade.
» Not subject to capital controls - Since they are not subject to capital controls, and are therefore, posing any challenge when it comes to spending in an outside nation regardless of its location worldwide, they are preferred for regulatory reasons.
» Black market downside - Since they can come with legal restrictions, the downside, for some traders, when using such currencies is that they can be lead to the black market.
» Dollarization process - In other cases, countries’ government may choose to abandon its local currency in favor of fiat money in such currencies; the process is called dollarization. Take for example the countries of El Salvador, Ecuador, and Zimbabwe whose governments choose to adopt the USD as their legal tender.
If you are an investor or a day trader looking for a reliable and stable value investment, safe haven currencies should be on your list of conservative investments.
Last update: 14. January
"Money is not an invention of the State. It is not the product of a legislative act. Even the sanction of
political authority is not necessary for its existence. Certain commodities came to be money quite naturally, as
the result of economic relationships that were independent of the power of the State."
Carl Menger - the founder of the Austrian school of economics