Edward Mason S909_ Moore#16

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What are global safe-haven currencies and why do they matter?

Safe-haven currencies are those investors flock to during crises, typically USD, JPY, and CHF. They strengthen when global risk appetite collapses, regardless of domestic fundamentals. For example, during 2008 and COVID-19 shocks, USD surged despite U.S. turmoil, as it dominates funding and reserves. JPY gains when investors unwind carry trades, while CHF rises on Switzerland’s political stability. Institutions model risk-off flows by tracking volatility indices, credit spreads, and capital flows. Retail traders can use safe-haven dynamics for hedging: long USD/JPY or short AUD/JPY during crises. Risks: central bank interventions (e.g., SNB capping CHF) can distort flows. Safe havens are anchors in forex, shaping global capital movement.