When people in a market find a secure place to put their money during stormy economic times, they are often said to have found “a safe haven.” Unfortunately, in the Forex market, there are not a lot of safe currencies to put your cash in these days. In recent decades the U.S. Dollar, the Japanese Yen and the Swiss Franc were considered such havens, largely because those currencies tend to rally when the stock market goes down, so people in stocks like to have some investments in those currencies in self-defense against sell-offs in the stock market.
Fortunately the U.S Dollar is still a good short-term trade. However, most people have already put some money in the dollar, while America’s long term economic outlook is still uncertain, so investors are now looking for other currencies to diversify their holdings beyond the dollar. The formerly reliable Franc and Yen however are currencies currently placed in danger by the erratic behavior of their central banks. Desperate to revive their economies, the Swiss National Bank and the Bank of Japan are aggressively intervening to prevent their currencies from becoming stronger. Whether this is a strategy that will result in economic revival remains to be seen, but for investors in their currencies that is not good news.
So is there no currency to serve as a safe haven besides the dollar? Many are saying that an “Asian Swiss Franc” has emerged in Singapore’s Monetary Authority, which has made no attempts to intervene and hold back the strengthening of their currency. Emerging market currencies rarely serve as safe havens, as many of them are poverty stricken police states. Singapore however, is impressing investors with its strong economic fundamentals and a central bank that seems to understand the wisdom of limiting economic interventions. They have huge foreign currency reserves, which enhances the safety of both their economy and its currency. The Monetary Authority is allowing their dollar to rise in accordance with whatever the market dictates, a practice which is becoming all too rare these days.
The Singapore currency is flexible and for those seeking short term gains it can be pretty good. The current conventional wisdom is that everyone should gain at least some exposure to the Singapore Dollar and the sooner you get in the better, perhaps pairing the Singapore Dollar with the Euro or American dollar to trade.