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Giles Coghlan B. G., Opalesque Geneva: Giles Coghlan, chief currency analyst at HYCM, a forex broker, shares his take on currencies, cash, recovery, and oil.
Opalesque: You say the USD, the JPY and the CHF act as safe-haven currencies. Do you think that is likely to last?
Giles Coghlan:
The typical reaction that we would expect in a risk-off environment, which we've seen due to the Covid-19 crisis, is Japanese Yen (JPY) and Swiss Franc (CHF) strength. On certain occasions, the US dollar (USD) operates as a safe haven in times of extreme crisis, like the 2008-2009 global financial crisis. We've seen exactly the same pattern now. Whether the dollar, yen and Swiss franc last as safe-haven currencies, it depends on how quickly or slowly we emerge from the current crisis.
Opalesque: And if we don't emerge soon?
G. C.:
Looking at the 2008-2009 crisis, one helpful indicator I like to use is the VIX - the volatility measure of the S&P 500. When it was elevated, equity markets sold off very heavily. About four months after the peak of the VIX, we started a recovery in US stocks. So, if we saw a similar path in the current Covid-19 crisis, I would expect global equity markets to have bottomed-out by around July-August, when the VIX has gone to its highs and then goes to more normal levels, and the markets are more reassured.
But there are some differences betwee...................... To view our full article Click here
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