I’ve seen a few people asking about this online and it got me thinking… Which currencies would actually be a safe haven for people who earn or hold majority US dollars?
In my understanding, most currencies are heavily impacted by the dollar for example the DXY. The DXY is a basket of six currencies: Euro, Japanese Yen, Pound Sterling , Canadian Dollar, Swedish Krona and Swiss Franc. Additionally, there are several currencies which are pegged to the dollar. I only know of a few which are the Hong Kong Dollar, and the Omani Real.
I’d imagine if something went horribly wrong with the dollar then the rest of these currencies would feel the effects.
Are there any currencies that are more insulated and actual safe havens?
There’s obviously gold and bitcoin but are there any other fiat options?
My Portuguese GV investment is my safe haven investment. I transferred the money over in January and already, just in currency fluctuations, I’m up about 5%. Besides Gold, which you mentioned, I think the next best currency is the Euro. I have concerns about the Japanese economy. I’m also worried about the CAD as I think the Cheetos tariffs will hurt Canada a lot. There are others, but I’m no Forex expert. Honestly if things keep going they way they’ve gone these last 2 month, no currency will be safe.
Safe havens from what? What is it you are hoping for?
If your earnings and expenses are primarily in USD and expected to stay that way, why do you care about the value of EUR JPY or MXN? What does it matter what the relative value of the dollar is versus anything else? This isn’t meant as an insulting question, it’s trying to isolate what you are hoping to achieve.
If you have expenses in some other currency, then you can hedge currency risk, but you’ll pay; generally you pay the interest rate differential plus 100-300 basis.
And yes, if something goes wrong with USD, given that it is the world’s reserve currency, everyone is going to be feeling the effects.
Most Americans simply don’t care, so most US advisors have no reason to care or learn. It’s also a complicated topic. There’s no simple rule like “buy stocks for the long run” or “60/40” or anything else. Dealing in currencies is more trading than investing, and financial advisors aren’t generally in that business.
It’s a topic I care about for obvious reasons. The thing is, there’s not a ton TO be done about it, as far as I can tell. You diversify and take your chances, maybe hedge out your risk best you can with currency forwards or futures options if you don’t mind paying.
I’m trying to find a good hedge. For example, when you mentioned that the dollar is the world reserve currency so “everyone is going to be feeling the effects”. What I’m trying to figure out is, “Who will feel the effects the least?”.
Or, someone who still does a lot of business with the US, but has a strong domestic and non-US market (in that priority order). If you apply these criteria, you’ll probably find your top 3 options, all of them in Asia, coincidentally…
So, what you are trying to do here is “guard against the value of the dollar going down”, I take it. If not, you need to be a little more specific.
In order to do this, you have to answer the question “going down against what”. If it’s “everything”, then you should buy some of “everything”.
There might be a broad-based-currency-basket ETF, but I don’t know of one. You could synthesize your own “ETF” using one of the pure-currency platforms like OANDA.
Generally people don’t want to hold currencies IMO, because you can hold bonds and at least get some interest. Of course you’re exposing yourself to interest rate risk, but you’re doing that one way or the other since interest rate differentials factor into cross rates. There are any number of international-bond ETFs you can get.
Gold is of course the traditional store of value and probably your best bet. There is something of a supply-and-demand effect, e.g. Chinese or Costco buying pressure, but that’s true of anything, even currencies.