Friday, August 5, 2011

Citigroup: buy yen and franc though with caution

Japanese yen and Swiss franc are traditionally seen as the safe haven currencies. However, the Bank of Japan’s intervention made yen slump by 300 pips in several hours ruining investors’ positions, while the Swiss National Bank’s pledge to keep the interest rates near zero also hit the market players. That’s not what one expects from the refuge currencies.  

Currency strategists at Citigroup claim that the speculators will now get more cautious, but the demand for yen and franc will remain high in times of extreme risk aversion such as the one that would occur in case of a global double-dip recession.

As a result, yen and franc may be still used to avoid high risk, but one should watch out for central banks.

daily usdjpy 11-28

Chart. Daily USD/JPY

published by FBS Holdings © 2011