Main points
Characteristics of safe haven currency
The reason why a currency is chosen as a safe haven currency by the market is not only the relative stability of its exchange rate, but also its tendency opposite to the exchange rate trend of major international currencies when the foreign exchange market fluctuates, that is, because of its negative correlation, it can become the stability of investors in the global asset portfolio and eliminate the foreign exchange risk of its global asset portfolio. Therefore, the safe haven currency is usually not necessarily a strong currency; As a safe haven currency, it will not be a weak currency in the international monetary market, that is, the currency needs to have a solid foundation in the international monetary market. The foundation of a country's currency stability comes either from the country's economic strength or from the currency's historical position in the international financial market. At present, the largest safe haven currency recognized in the market is the yen, followed by the Swiss franc, which is sometimes considered as a safe haven currency.
The basis of safe haven currency
Japan formed a global layout of investment in the bubble economy of last century. It was therefore considered that its asset allocation is global. The economic and financial fluctuations of a country or region will increase the amount of capital to return to Japan, and therefore the yen usually has the ability to resist the main international currencies fluctuations in the foreign exchange market. Since the collapse of the bubble economy, yen's position in the international money market has declined, but Japan's position in the world economic structure and international finance still determines the basic position of the yen in the global currency. Free flow is also an important factor determining whether a currency can become a safe haven currency, that is, the safe haven currency is the international currency first. The nature of the Swiss franc as a safe haven obviously lies not in the economic and financial strength of the currency issuing country, but in the reality of its free currency and the historical reputation of a stable currency.
The RMB may enter a medium - and long-term stable stage
The internationalization of RMB is actually a response to China's economic progress and international development. With the internationalization of economic development, it will naturally bring the requirement of the independence of the trend of RMB exchange rate. Purely from the perspective of market operation, in the process of currency internationalization of any country, the long-term operation trend of currency exchange rate is bound to show a steady rise. According to the openness of capital and financial items, RMB is still not a fully convertible currency. Therefore, the market performance of RMB exchange rate since 2022 just happens to have the characteristics of "safe haven currency". Due to the weakness of the US economy, we believe that the future fed interest rate increase may be less than expected, and the US monetary policy may turn to YCC, that is, the yield curve control strategy focusing on suppressing the forward interest rate. Judging from the term structure of interest rates in the US interest rate market, the United States not only will not raise interest rates, but even has the demand to reduce interest rates. The interest rate spread between 10-year and 2-year US Treasury bond interest rates, usually the leading indicator for observing the adjustment of fed interest rates, has once again tended to zero.
Risk tips
The conflict between Russia and Ukraine has expanded, China's inflation has risen higher than expected, the international financial situation has changed, and China's monetary policy has changed more than expected.
