The next safe haven currency is going to be the Chinese Yuan, according to JP Morgan. The Swiss central bank announced yesterday that Swiss Franc is pegged with Euro, and the lowest exchange rate of EUR/CHF is 1.2:1. On the same day, CHF/USD declined by over 9%. Investors looking for safe haven have to switch from Swiss Franc, but what will be the next ideal safe haven currency?
Rebecca Patterson, chief market strategist of JPMorgan Asset Management, told her clients the following:
In foreign exchange market, more and more countries depreciate its local currency to stimulate the export and the economy. For instance, US and UK have been depreciating their currencies by quantitative easing, Japanese central bank’s intervention to the FX market with the help of other G7 countries led to the depreciation of JPY. Now, Switzerland is another example.
Rebecca Patterson’s advice about safe haven currency:
Most Asian countries’ currencies will remain the front and center as these countries have large amounts of current account surplus and relatively healthy finance, and their trade and capital flow are related to China. However, JPMorgan do not expect the central banks of these countries to accept the fate of becoming another Switzerland, given their reliance on exports. In fact, the intervention or adjustment of the monetary policy in the second half of the year may increase the pressure of capital flow. The only exception may be China. JPMorgan still believes that USD/CHY will continue to go down gradually, as Chinese policy makers will use CHY to help control the inflation risk and slowly adjust the economy towards domestic needs. Although CHY is less liquid and accessible, it is still very likely to become the safe haven currency today outside of gold.