As global equities reel on escalating tensions between Russia and Ukraine, investors have dumped riskier securities, turning to safer assets and exchange traded funds to ride out the choppy waters.
During times of global turmoil, investors seek out safe-haven assets like the Japanese yen, Swiss franc, U.S. Treasuries, U.S. dollar and gold bullion.
“Investors turned to classic safe havens amid heightened tensions in Ukraine,” Joe Manimbo, senior market analyst at Western Union Business Solutions, said in a Reuters article.
For instance, the yen rose to a one-month high against the U.S. dollar after Russia gained control of Crimea, reports Joseph Ciolli for Bloomberg. The yen now trades at 101.43 per U.S. dollar.
Meanwhile, the Swiss franc jumped to a one-year high against the euro currency; however, the franc depreciated against the U.S. dollar.
“We start the week under pressure that built up over the weekend, thanks to aggressive rhetoric and action by Russian Prime Minister Putin,” Christopher Vecchio, a currency analyst at DailyFX, said in a note. “The Japanese yen and Swiss franc have filled the void as safe havens.”
The CurrencyShares Japanese Yen Trust (NYSEArca: FXY) was up 0.3% and CurrencyShares Swiss Franc Trust (NYSEArca: FXF) was down 0.4% Monday. Both ETFs track the movements of their respective currencies against the U.S. dollar. [Amid Turmoil, the Allure of Safe-Haven Currency ETFs]
Additionally, global uncertainty sent international investors into the relative safety of U.S. Treasuries, which bolstered the U.S. dollar. The greenback also found support from positive economic data, such as rising personal income and spending in January despite the winter storms.
The yields on the benchmark 10-year Treasury dipped a little over 5 basis points to 2.605% Monday. The iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT) was up 0.4% and the iShares 7-10 Year Treasury Bond ETF (NYSEArca: IEF) gained 0.2%. Bonds have an inverse relationship to yields, so falling yields corresponds with rising bond prices.
Meanwhile, the PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP), which tracks the performance of the U.S. dollar against the euro, yen, pound, Canadian dollar, krona and franc, was up 0.4% Monday.
Lastly, investors have been turning to the SPDR Gold Shares (NYSEArca: GLD) as a safe-haven hedge against market volatility. Gold helps investors maintain wealth as global currencies sporadically fluctuate during risk-off conditions. GLD is up 2% Monday as gold futures hit $1,351.2 per ounce, a four-month high. [Safe-Haven Interest Supports Gold ETFs; Bullion Prices at 16-Week High]
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Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.