Safe haven currency hedging
Why do US and Swiss pension funds use different currency risk strategies?
When natural disasters strike or danger looms, people seek safe havens. Investors behave similarly: During global turmoil, they transfer funds to stable countries such as Switzerland or the United States. This increases demand for Swiss francs and US dollars, causing these safe haven currencies to appreciate significantly.
As a result, Swiss and US investors face substantial losses in their international portfolios as the foreign currencies in which these investments are priced depreciate against strengthening domestic currencies.
November 24, 2024 |
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