What Safe Haven Asset/Currencies Are and the Role They played During the Brexit

A safe haven currency is a currency that investors and traders believe is stable enough to keep its value compared to other currencies in times of economic uncertainty, inflation and other forms of crisis.

However, what are considered safe havens alter over time as market conditions change, and what appears to be a safe investment in one down market could be a disastrous investment in another down market.

Generally, safe haven currencies are from countries that have very stable economies, so the currency does not change much in value.

In forex, the Japanese yen (JPY) and Swiss franc (CHF) are often considered to be safe haven currencies. Also Gold is considered a safe haven asset as throughout history it has been viewed as a store of value. It is essentially a currency that cannot be manipulated by interest rate policies of any government, and has traditionally been used as a hedge against inflation. In the United States, Treasury Bills are also considered a safe haven even in a tumultuous economic climate because they are backed by the full faith and credit of the U.S government.

The Role They played During the Brexit

As global market plummeted on Friday after the UK voted to leave the European Union, investors sought shelter where they could find it. There was a stampede into so-called safe haven assets, including gold, government bonds and certain currencies.

Investors pushed the price of gold up more than 4% to 1,315 per ounce on Friday. Shares of most gold mining companies were also up for about 4%.

Investors also flocked to government bonds, sending the yield on a 10-year U.S. Treasury down to 1.57% from 1.73% the previous day. The yield could sink all the way to 1.35%, says Goldman Sachs. The yields on government bonds from places like Germany, the U.K. and Japan also fell sharply on Friday.

As the British pound was hammered, some investors elected to move into currencies they view as safer, like the Swiss Franc and Japanese Yen. “The yen has been the best-performing currency at times of heightened uncertainty lately.