Greek Fears Boost CHF over JPY for Top Safe Haven

The Swiss franc has emerged as a big winner from Greece’s debt problems, overtaking the Japanese yen as investors’ favourite safe-haven currency despite Switzerland offering the world’s lowest interest rates.

Fund managers have increased their Swiss franc holdings in recent weeks, attracted by the Alpine economy’s current account surplus and by falling annual consumer prices that mean investors can still eke out a positive return even with benchmark rates at -0.75 percent.

The franc and the yen are traditionally favoured during times of market stress or economic uncertainty. Usually the yen is the more sought-after, since it is more liquid. However, data from Swiss bank UBS shows that in the past three weeks the franc has emerged as the best-bid major currency.

“There is no doubt that between the yen and the Swiss, the yen has lost out,” said Niels Christensen, FX strategist at Nordea. “In a risk-off environment, especially on worries about Greece, we are not seeing as much of a reaction from the yen as we are seeing for the Swiss franc.”

The franc this week hit its highest against the yen since late-January, just days after the Swiss National Bank abruptly abandoned a 1.20 francs per euro cap on Jan. 15, sending the currency soaring.

It also imposed negative interest rates to discourage inflows. At -0.75 percent, they are the lowest in the world, though Denmark has since cut to the same level.

However, the negative rates have done little to deter investors, especially those seeking safety, with recent SNB data suggesting portfolio investments and repatriation by large Swiss investors back to Switzerland remain robust.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza