Money in Motion

Euro Fatigue? Trade These Safe-Haven Currencies

Shannon Fagan | Image Source | Getty Images

The ongoing crisis in the euro zone is creating a trading opportunity among safe-haven currencies, this strategist says.

Euro zone leaders are meeting today, which is a good thing - they have plenty to talk about. Whether they will accomplish anything major, though, is an open question.

That is a problem. Italy's bond yields are on the rise and Italian authorities have taken steps to curb short-selling on the Milan stock exchange as worries deepen that the sovereign debt crisis could spread there.

As for Greece's stubborn debt woes, there is talk that European Union leaders are more willing to accept the notion of a Greek default - but there are almost as many views on what to do as there are parties at the table in the sovereign debt negotiations. 

If it's just too stressful right now to trade the euro, think about focusing on safe-haven currencies. Barclays Capital says this is a great time to go long the dollar and short the Swiss franc.

"Given the event risks this week, we favor being long USD/CHF. Assuming that prospects do improve within the euro area, the CHF's value as a hedge will diminish. If, however, euro area events get much worse, we think it would become an increasingly important problem for global financial markets. In which case, even given the weak payrolls data, the USD looks best placed to benefit," wrote Sara Yates, a currency strategist at Barclays Capital, in a research note. She recommends entering at current rates, and expects the pair to reach 1.00 in three months' time.

Remember, too, that the Swiss franc has had quite a run this year, and the dollar has been beaten up with great regularity.

So, how do you spell relief? d-o-l-l-a-r/S-w-i-s-s-i-e.


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