A client note from analysts at Citigroup compared how the yen preformed against how the CHF performed won days when the S&P500 dropped 2 or more percent
- found the yen was the bigger winner … "emphatically"
- Prior to 2008 it was the CHF, but not any more
- "With the outlook for market volatility to stay high going into the end of the year, more frequent bouts of risk aversion are likely to emerge
- There is only one standout safe haven currency to own."
But wait, there is nuance!
- when the epicenter of risk aversion is in Europe, the yen tends to outperform the franc
- For Asia-focused episodes, there is no clear bias between the two
several potential reasons
- greater position short-covering for the yen
- changes to Swiss banking regulations
- cheapening of the yen against the franc
- a larger pool of Japanese assets abroad, which allows for greater repatriation than in the case of Switzerland
- Differences in central-bank FX policy - BOJ has intervened in currency markets on just eight days since the crisis, while the Swiss National Bank has gotten involved on a regular basis
