Sept. 6, 2011, 5:41 p.m. EDT
Swiss move sparks search for safe-haven currencies
By V. Phani Kumar, MarketWatch
NEW YORK (MarketWatch) — Faced with fewer safe-haven alternatives in the wake of the Swiss National Bank’s move to keep the franc from rising, investors might now pile into the U.S. dollar, as well as currencies that usually don’t figure on the radar of those avoiding risks.
Such alternatives could include the Canadian and Australian dollars, the Swedish krona and the Norwegian krone — currencies that usually tend to rise in value when an improving global economy spurs risk-taking, and drop during bad times — say analysts.
The SNB’s decision “takes the Swiss franc off as a risk-off currency for the time-being,” said Andrew Busch, global currency and public policy strategist at BMO Capital Markets.
“It also brings the Bank of Japan or the Japanese government into the same position, where they continue to intervene by buying the U.S. dollar against the yen, taking another risk-off currency away from the market,” Busch said.
Busch and other analysts said the sovereign debt crisis in the euro zone and the resulting aversion to risk was likely to support the U.S. dollar in the near-term, although the American economy itself faced its own share of problems and was passing through an economic slowdown.
Concerns about limited availability of safe-haven alternatives flared up Tuesday after the SNB stunned markets by setting a floor for the euro-Swiss franc /quotes/zigman/4868091/sampled EURCHF -0.05% at 1.20. Read full story on the SNB’s decision.
The extraordinary move to intervene in the currency markets was aimed at preventing the Swiss franc from rising further from what the SNB described as a “massive overvaluation,” prompting a swift and sharp reversal for the local unit against major global currencies. Read full currencies story.
Japan also intervened in the foreign exchange markets this year to protect the domestic economy from the ill-effects of an appreciating local currency.
These moves by Switzerland and Japan, which own currencies that are liquid in global markets and have been used as a hedge against global economic headwinds, are forcing investors to look for alternatives.
The article goes on to recommend some possible safe-haven currencies including the Swedish and Norwegian krone, Australian and Canadian dollars, and New Zealand's currency (the Kiwi, if I remember right.):
http://www.marketwatch.com/story/swiss-move-sparks-search-for-safe-haven-currencies-2011-09-06
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