What are the safest currencies on the market that are withstanding Trump's ongoing tariffs?
Investors are flocking to safe-haven assets after US President Donald Trump announced a series of reciprocal tariffs last week, and many analysts are currently studying the Japanese yen, bonds, as well as several other "interesting" assets.
"The Japanese yen will be a good candidate and perhaps the best to hide from trade tensions and a U.S. recession, for a host of well-known reasons ," said Ebrahim Rahbari, head of rates strategy at Absolute Strategy Research.
“It is cheap, the potential fall in US interest rates will narrow rate differentials against the yen, and although Japan is a prominent exporter, its overall support from trade is lower now, especially as fiscal policy has been loose ,” he said.
The yen has strengthened about 3% against the greenback since April 2, according to data from LSEG. Rahbari added that the Swiss franc is another “obvious candidate” as an investment hedge. The franc has also appreciated by more than 3% to 0.846 against the U.S. dollar, a six-month high. The moves come as other currencies around the world are weakening significantly.
Another strategist echoed the view that the yen and Swiss franc are among the best options to cushion the impact of Trump's tariffs. " Both the Japanese yen and the Swiss franc are good currencies to help cushion the market's visceral reaction to tariffs," said Matt Orton, head of advisory solutions and market strategy at Raymond James Investment Management.
But Orton expects the Swiss franc to act as a better hedge than the yen, given the uncertainty surrounding the Bank of Japan's rate hike path.
The yen typically performs better in times of recession or global crisis, said Jeff Ng, head of Asia macro strategy at Sumitomo Mitsui Banking Corporation. “Even if the world avoids a hard landing, [the yen] could also do well as the BOJ will probably rise further against a wave of central bank easing,” he said.
However, he warned that Japan's economy is also facing headwinds from Trump's tariffs, particularly on autos and components. And a slowdown in the economy means the BOJ will be more inclined to keep rates low, keeping the yen weak.
A more interesting question is whether there could be more “exotic” hedges besides classic safe havens, said Rahbari, who mentioned the Brazilian real as an option. “ The idea is that it’s cheap, it has high carry and it’s relatively less exposed to global trade,” Rahbari said, adding that the real has been one of the biggest currency performers this year.
Bonds and gold?
Investors have also been piling into cash, as well as low-risk fixed-income options such as Treasuries and bonds. Bond yields have also been falling, reflecting rising demand for bonds, with the yield on the 10-year U.S. Treasury note falling 6% since April 2 to a low of 3.873% on Monday.
Japan's 10-year government bond yield fell to a record low of 1.05% on Monday, down 28.52% from its April 2 close of 1.469%. It is also the lowest the 10-year JGB yield has been since December 2024.
Risk positioning has dominated markets as participants sell stocks in favor of Treasurys, gold bullion, futures contracts, barrels of crude oil, volatility call options, equity index put derivatives and forward contracts, said José Torres, senior economist at Interactive Brokers.
Gold prices surged to a record high immediately after the retaliatory tariffs were announced. Although they have since fallen slightly, prices of the beloved safe haven remain at elevated levels. Market watchers expect there will be more room to operate as global markets remain bullish.
“Gold remains buoyed by escalating trade uncertainties, heightened geopolitical tensions, a weaker US dollar, increased central bank purchases and rising recession risks ,” BMI analysts said. SMBC’s Ng said gold is typically a safe haven during financial crises, noting that demand from private households and governments remains resilient. However, he said, “prices have been stretched to the upside.”
The reasons behind gold's stellar start to 2025 are only stronger now that Trump has announced his tariffs, said Adrian Ash, director of research at BullionVault. "Weaker trade, higher input costs and shrinking margins are hurting the stock market badly, while geopolitical uncertainty is deepening. Such a bleak outlook for economic growth provides the perfect backdrop for further gains in gold," he said.
U.S. stocks ended a brutal week for investors on Friday, down 9.08%, according to data from FactSet, as Trump's moves prompted more calls for a global economic slowdown. JPMorgan, for example, raised the odds of a U.S. and global recession to 60% by the end of the year, up from 40% previously . "There's no bidding on the stock right now," said Orton of Raymond James Investment Management.
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