Forex Currencies And Assets Rise/Fall
1. Currencies and Assets Rise :
Here again, the investments considered safe investments (called "safe heaven") by the traders:
- Swiss franc (CHF) climbs through the historic neutrality of Switzerland. Once a conflict erupts in the world and threatens to spread, repatriation of capital in the direction of Switzerland took place, for fear of confiscation. In addition, many people have capital in Switzerland since the tax rate is low;
- Gold (XAU) rises because the asset is the safest (in time of war, it does not need a bank to protect its wealth: you can bury);
- Yen (JPY) rises sharply due to unwinding of carry trade positions, which implies a decline in USD / JPY;
- Dollar rises as U.S. investors who sold their shares and other assets in foreign currency, convert them to gather in their local currency: the dollar. Many hedge funds have their accounts in dollars. Paradoxically, even if the crisis comes from a U.S. problem, the dollar rises. And also, because it is always the reference currency in the world;
- USD / CHF decline, because even if the two assets amount at the same time, they do not rise at the same pace;
- USD / CAD rises because the Canadian dollar (CAD) because of lower CAD / JPY declining dollar and rising;
- USD / ZAR (South African rand) rises as carry trade currencies are falling and the rising dollar;
- Bond prices rise (and therefore interest rates fall). It's true, especially for bonds, because they are safer.
2. Currencies and assets that fall :
Here are the assets considered risky by the traders:
- All the carry trade currencies (NZD, AUD, TRY, MXN, ISK, INR, ZAR) collapse (This means that the parities USD / TRY, EUR / ISK, USD / INR, and so on. Explode on the rise);
- EUR / USD lower as it follows the EUR / JPY which is a carry trade, which drops sharply;
- Shares fall as traders anticipate a slowdown in the economy;
- More generally, commodities down with them and the currencies of commodities such as AUD, the NZD, CAD, etc.. ;
- So the AUD / USD AUD decline since the fall and the dollar rises.
Obviously, when the crisis dissipates, we see the movements in the opposite direction. And you need to prepare because they can be almost as violent and sudden!
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