Definition – What does Safe Haven Currency mean?
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. Generally, safe haven currencies are from countries that have very stable economies, so the currency does not change much in value.
ForexTerms explains Safe Haven Currency
In times of crisis, wealthy investors may seek to diversify their cash holdings away from their home county’s currency to reduce the risk of losing wealth through depreciation in the currency. By storing their wealth in safe haven currencies, an investor can cut down the risk of any single country seeing its currency sharply revalued. At the same time, traders try to read the moves in to and out of safe haven currencies in order to take up positions that profit from the buying and selling pressures these currency moves create.
Although the label of safe haven doesn’t always apply, the U.S. dollar (USD), Japanese yen (JPY) and Swiss franc (CHF) are often considered to be safe haven currencies.