Is USD/CHF the best Safe Haven currency pair?

OANDA Currency Correlation Table

EUR/USD has been regarded by many as a “Risk Currency” e.g. EUR/USD will rally when market is optimistic and upbeat about the economy, and vice versa. The antonym of “Risk Currency” would be “Safe Haven”, which will rally when market is generally fearful and pessimistic, vice versa.

Using the correlation table found on OANDA’s Forex Labs website, one can simply find out how currencies perform against each other. A positive number means that should EUR/USD (the reference currency pair in this case) go higher, those currency pairs with positive correlation (red) will rally as well. Negative numbers (blue) indicates that the particular currency pair will decrease in price when EUR/USD rally.

The higher the absolute number (e.g. -1 or 1), the stronger the correlation is observed.

So what does this table tell us?

USD/CHF appears to have the strongest correlation with EUR/USD with close to -1.00 across all time frame, even under hourly timeframe which shows how tightly USD/CHF tracks EUR/USD movement.

2 implications from this observation:

1) If EUR/USD remains highly correlated to “Risk Trends”, USD/CHF will naturally be the best “Safe Haven” currency, tipping conventional safe havens such as Yen and Gold.

2) Hedgers who do not wish to trade EUR/USD due to uncertainty in the Euro-Zone may end up having the similar exposure if trading USD/CHF alone.

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