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FOREX.com presents The end of the safe haven? . Kathleen Brooks Research Director. Contents . De-constructing the myth of the safe haven Why did we believe in them, why we won’t in future “Safe havens” for the new paradigm . Traditional safe havens . Yen . Swiss franc . Treasuries.
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FOREX.com presents The end of the safe haven? Kathleen Brooks Research Director
Contents • De-constructing the myth of the safe haven • Why did we believe in them, why we won’t in future • “Safe havens” for the new paradigm
Traditional safe havens Yen Swiss franc Treasuries Gold
What does it mean? • Uncorrelated to risk • Trustworthy • Stable • Piece of mind • Liquid
Safe havens: why do we need them? • We like things that go up
Key characteristics – Strong domestic finances Politically stable Not controlled by capricious forces History of paying debts
The unreliable safe haven
What made us open our eyes? 1, Financial crisis – we became aware of debt 2, Sluggish recovery – causes central banks to act beyond traditional mandate
The new reality in trading 1, central banks and governments are not safe… 2, Be careful who you trust 3, Currency wars a potential for the future 4, public finances – takes years to repair
Trading in the new paradigm 1, Accept the volatility of markets 2, Look for other assets without these risks 3, factor in political and CB risk in your trading
What safe havens today need to offer • Free from meddling by capricious central banks • No sovereign problems • Strong fundamentals
Safe havens of the future - • Commodities: • Pros – demand expected to remain high • Cons – at risk from growth cycles, apart from agriculture …
Safe havens of the future - • Commodity bloc currencies : AUD, NOK, SEK, CAD, NZD • Pros – no financial problems • Cons – limited liquidity, still affected by global growth cycle
Safe havens of the future - • EM government debt • Pros – no financial problems • Cons – shallow markets, limited liquidity, politically unstable, no proven track record
Argument for agri as safe haven • Positive: • Demand is recession proof • Growing global population • Highly liquid – often traded … • Not controlled by a central bank • Negative: • Can be volatile due to the weather and growth conditions • Sensitive to supply issues (demand fairly solid).
Access to agri – FOREX.com • Products: TRADE platform • Wheat • Cocoa • Cattle • Hogs • Corn • Oats • Rice • Soybean • Tip – stick to the staples, and meat…
Access to agri – FOREX.com • Ease of trading with TRADE platform • Spreads are fixed for ALL markets • Comprehensive tools and analysis – Market DNA – revolutionises technical trading • Integrated news and research
FOREX.com presents The end of the safe haven? Kathleen Brooks Research Director