What is a safe haven currency? Where money goes when markets panic
By SendPay Business · · 2 min read
A safe haven currency is one that investors tend to buy when markets are frightened, so it often holds its value or rises while riskier assets fall. The US dollar, the Swiss franc and the Japanese yen are the ones most often named.
What makes a safe haven
- A large, easy-to-trade market, so money can move in and out quickly.
- A stable government and legal system.
- A strong record on inflation and public finances.
- For some, a country that lends more abroad than it borrows.
Risk on and risk off
Traders describe calm markets as risk on, when money flows to higher-yield currencies and shares. When fear rises, they switch to risk off and money flows back to safe havens.
Why the label isn't a guarantee
Safe havens can still fall. Central banks sometimes act to stop their currency rising too fast, as the Swiss National Bank did when it capped the franc against the euro from 2011 to 2015. How a currency behaves in one crisis may not repeat in the next.
Where SendPay fits
SendPay platforms let customers hold GBP, EUR and USD and exchange between them at a fee the platform owner sets, powered by licensed partners. SendPay doesn't offer trading.
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A currency central banks hold in large amounts, led by the dollar.
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Borrowing in a low-rate currency to invest in a higher-rate one.
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This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.