Safe-haven currency: An empirical identification

This paper attempts to empirically identify strong safe havens among six currencies: the Swiss franc, Japanese yen, British pound, euro, Canadian dollar and Norwegian krone. Using Markov regime-switching vector autoregressive models, we test whether the currencies are negatively related to risky assets and whether the negative relation is stronger in times of crisis than in times of growth. We find that (1) the Swiss franc and Japanese yen qualify as strong safe havens, and (2) the other currencies qualify as equity-like or risky currencies.