“The Japanese yen will be a good — and probably the best — candidate to hide from trade tensions and a U.S. recession, for a whole host of familiar reasons,” said Ebrahim Rahbari, head of rates strategy at Absolute Strategy Research.
Zhang Xiaoyu | Xinhua News Agency | Getty Images
Investors are flocking to safe haven assets after U.S. President Donald Trump announced a swathe of reciprocal tariffs last week — and some are looking at the Japanese yen, bonds, as well as a few other “exotic” assets.
“The Japanese yen will be a good — and probably the best — candidate to hide from trade tensions and a U.S. recession, for a whole host of familiar reasons,” said Ebrahim Rahbari, head of rates strategy at Absolute Strategy Research.
“It is cheap, the likely decline in U.S. interest rates will narrow the rate differentials to the yen, and even though Japan is a prominent exporter, its overall reliance on trade is lower now, particularly as fiscal policy has been loose,” he told CNBC via email.
The yen has strengthened around 3% against the greenback since April 2, according to data from LSEG. Rahbari added that the Swiss franc is another “obvious candidate” as an investment hedge. The franc has likewise appreciated more than 3% to 0.846 against the U.S. dollar — a fresh six-month high.
Those moves come as other currencies around the world weaken.
Stock Chart IconStock chart icon
Another strategist echoed the view that both the yen and the Swiss franc are among the best options for cushioning the impact of Trump’s tariffs.
“Both the Japanese yen and Swiss franc are good currencies to help mitigate the visceral reaction of the market to tariffs,” said Matt Orton, head of advisory solutions and market strategy at Raymond James Investment Management.
But Orton expects the Swiss franc to act as a better hedge than the yen, given the uncertainty surrounding the path of Bank of Japan’s rate hikes.
The yen usually outperforms in times of global recessions or crisis, said Jeff Ng, head of Asia macro strategy at Sumitomo Mitsui Banking Corporation. “Even if the world avoids a hard landing, [the yen] may also do well as the BOJ will possibly hike further against a wave of central bank easing,” he said.
However, he warned that Japan’s economy is also facing headwinds from Trump tariffs, particularly from tariffs on automobiles and components. And a slowing economy would mean that the BOJ will be more inclined to keep rates low, keeping the yen weak.
A more interesting question is whether there could be more “exotic” hedges aside from the classic safe havens, said Rahbari, who named the Brazilian real as an option.
“The idea being that it is cheap, has high carry and that it is relatively less exposed to global trade,” said Rahbari,