AT TIMES of worry, investors will naturally flock to safe havens and this explains the rise in the Swiss franc. Japanese stocks saw the worst two-day decline since 1987, brought on by the combined events of the tsunami, earthquake and now the radiation leak. This encouraged investors to pile in to the Swiss franc and out of riskier currencies like the euro. With the risk of nuclear fallout still a major concern, less risky assets must be favoured. Capital Spreads quotes euro-Swiss franc at SFr1.2790-SFr1.2794.
Safe haven flows continue to boost the Swiss franc in the light of the deteriorating situation in Japan. However, with the yen also benefiting from safe haven inflows the two currencies are indulging in a tug of war for best performing currency. CMC Markets spread for Swiss franc-yen is ¥88.087-¥88.127.
It wasn’t just the euro and the dollar that have been killed against the yen over the last few days, the carry trades have also been smashed lower on risk aversion and yen buying. Australian dollar-yen has plummeted 322 basis points since Friday to test a significant support-resistance level at ¥79.710 and is now hundreds of points below all major moving averages. Spread Co offers a spread on Australian dollar-yen of ¥79.745-¥79.785.
The fiscal impact of the Japanese crisis will be significant given the enormous debt burden, yet the currency impact should be less profound. Commodity currencies will struggle against the yen due to event risk, but its upward trend probably won’t be broken since most central banks are actively looking to raise rates. Alpari UK offers a spread of ¥113.01-¥113.04 on euro-yen and ¥81.47-¥81.49 on dollar-yen.