Tell you why yen is a safe haven currency from three aspects

Fundamental analysis/


Many people have probably heard of the saying of safe haven currency. For a long time, yen has been called a safe haven currency. Many people don't understand it very well. The following editor will explain why yen can become a safe haven currency from three aspects.


1. What is safe haven currency


Generally speaking, safe haven currency refers to the currency that is not easy to be affected by politics, war, market fluctuations and other factors, and is not easy to devalue. When the uncertainty in the market increases, investors will choose to buy safe haven currency. Some people think that safe haven currency is a kind of financial instrument with low risk and high liquidity. Wikipedia explains that safe haven currency (also known as hard currency and strong currency) can be all global trading currencies with stable and reliable value storage capacity. The factors that make a currency a safe haven include the long-term stable purchasing power of the currency, the political and financial status and prospects of the country where the currency belongs, and the relevant policies of the local central bank. On the contrary, risk currency refers to the currency that fluctuates irregularly or depreciates against other currencies due to political and financial instability.


2. Why is yen a safe haven currency


The risk aversion of Japanese yen mainly comes from Japan's geographical attribute, economic strength, monetary attribute and monetary policy. First, Japan is an island country, which is not easy to be affected by politics, war, market fluctuations and other factors, and can avoid the risk of devaluation to the maximum extent (not that it will never devalue). 2、 As a developed country, Japan has a reasonable economic structure, a mature economy and a complete financial system. In short, Japan's strong economic strength provides a foundation for the stability of the value of the yen. More importantly, Japan has foreign exchange reserves second only to China. 3、 The yen is a freely circulating currency. 4、 Yen is a low interest currency, which is the most direct reason for yen to become a safe haven currency. When the economy fails, it is necessary to cut the interest rate to stimulate the economy. When the interest rate is cut, it is relatively uneconomic to hold the currency, and it is expected that the interest rate will be cut. If the exchange rate of high interest currency is suppressed, low interest currency will have a hedging effect. Japan's long-term low interest rate makes it impossible to reduce it. When there is a crisis, other countries' currencies may reduce their interest rates and depreciate, and the yen is unlikely to reduce its interest rates, so the yen is a safe haven.


To be a safe haven currency for a long time, the money market must be transparent. That's why the RMB can't be called a safe haven currency.


[disclaimer] the publication of this article by finance managers for the purpose of transmitting more information does not mean that they agree with their views or confirm their descriptions. The content of this article is for reference only, and does not constitute an investment proposal. Investors operate on this basis at their own risk

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