What Are Safe Haven Currencies And How To Invest In Them?

What Are Safe Haven Currencies And How To Invest In Them?

The global financial markets can fluctuate greatly over the course of a year. Recessions and booms can alternate, which can test the endurance of even the most seasoned investors. 

In the forex market, this can be especially pronounced, as currencies are directly tied to the overall health of the underlying economies. 

When the broader market takes a hit, many investors tend to flock to only a handful of super-stable currencies, which are the U.S dollar, Japanese yen, and the Swiss franc.

But why do investors favor these currencies and what makes them stand out on the market?

All three of these currencies represent highly-developed economies with major financial markets that attract billions of dollars of investment every year. 

If you are interested in safe haven currencies and would like to invest in them yourself - this Investfox guide will help you. 

United States Dollar (USD)


The U.S dollar is the single most traded currency in the world, with the Dollar Strength Index (DXY) being closely followed by traders around the globe. 

There are a number of valid reasons as to why the U.S dollar is considered a safe haven currency and why the changes in interest rates and money supply are so closely monitored around the world. Some of these reasons include:

  • Global Reserve Currency: The USD holds a dominant position as the world's primary reserve currency. Many central banks around the world hold substantial reserves of US dollars. This status as a global reserve currency provides it with stability, liquidity, and widespread acceptance, making it a reliable safe haven
  • Economic Strength: The US boasts one of the largest and most diversified economies globally. It has a diverse range of industries, including technology, finance, healthcare, and manufacturing. For this reason, the U.S economy attracts the most amount of foreign capital to its financial markets 
  • Geopolitical Influence: The United States plays a significant role in global geopolitics. As a result, during international crises or conflicts, investors may seek refuge in the USD, perceiving it as a safe and stable currency
  • Petrodollar - The global oil market uses the U.S dollar as the primary mode of exchange, which gives USD an outsized importance in the global market. Investing in oil is directly tied to the performance of the dollar

Japanese Yen (JPY)


The Japanese yen is the most stable currency in the Asian market and a special currency in terms of inflation. The currency has experienced deflation for the past few decades and the government has been actively increasing the money supply to combat this.

Here are a few key reasons why the Japanese yen is considered a safe haven currency in the forex market:

  • Trade Surplus: Japan is a country that often maintains a trade surplus, which means it exports more products than it imports and is generally a high valued-added economy. This contributes to the stability and overall strength of the yen 
  • Low Interest Rates: The Bank of Japan has maintained low-interest rates for an extended period, which can make the yen attractive for borrowing and carry trading. The near-zero interest rates serve to combat deflation, as already mentioned above
  • Safe Government Bonds: Japanese government bonds (JGBs) are considered safe investments, and during times of uncertainty, investors may seek refuge in yen-denominated assets

Swiss Franc (CHF)


The Swiss franc is the most stable currency in Europe and a safe haven asset for the neighboring EU market. The country is highly developed with attractive markets and substantial gold reserves, which adds to its stability. 

Here are some vital factors that make the franc a safe haven currency:

  • Financial Stability: Switzerland is known for its strong and stable financial sector. The country has a history of political neutrality and a well-regulated banking system, which enhances confidence in the Swiss franc
  • Low Inflation: Switzerland has a track record of low inflation, which helps preserve the value of the currency
  • Franc's Historical Strength: The Swiss franc has a history of appreciating during times of market turbulence, making it a reliable choice for investors seeking safety

How To Invest In Safe Haven Currencies

Investing in safe haven currencies is a straightforward process. Those interested can open a forex brokerage account, deposit funds and choose the currency pair they would like to invest in. All three of these currencies are components of major currency pairs, such as JPY/USD and USD/CHF. 

However, it is important to note that forex trading carries inherent risks and choosing when to enter the market can be the deciding factor in the success of your investment. 

Forex brokerages typically charge spreads on every currency pair, but since these are major currencies, their pairs typically have very tight spreads. Some forex brokers also offer zero-spread accounts. 

Key Takeaways From What Are Safe Haven Currencies And How To Invest In Them

  • In the FX market, safe haven currencies are the most stable currencies that investors tend to buy up during periods of high market uncertainty
  • USD, CHF, and JPY are considered as safe haven currencies and are components of major currency pairs 
  • Safe haven currencies have some of the lowest spreads in trading, due to their high liquidity 
  • Economic and political stability and developed financial markets allow safe haven currencies to attract billions in investment capital during market uncertainty 

FAQs On What Are Safe Haven Currencies

What are safe haven currencies?

Safe haven currencies in forex trading refer to the U.S dollar, Japanese yen and Swiss franc, which are some of the most stable currencies in the world, with advanced economies backing them. Investors often buy these currencies when there is a lot of uncertainty on the market. 

Are major forex pairs safe haven investments?

Safe haven currencies make up major forex pairs, such as JPY/USD and USD/CHF. However, not all major pairs are made up of safe haven currencies. The likes of GBP and EUR are not considered safe haven currencies by forex investors. 

Do safe haven currencies have high spreads?

No, safe haven currencies are highly liquid and their pairs are some of the most liquid investments in the forex market. 

Some forex brokers also offer zero-spread accounts which are extremely convenient for traders.