Time-varying intra-safe haven currency behaviour: The U.S. dollar, the Swiss franc, and the Japanese yen

Abstract

A flight to quality occurs from risky assets to safe-haven assets in heightened volatile markets of crisis periods. A safe-haven currency gains its value against other currencies in such crisis periods. Traditionally, the U.S. dollar, the Japanese yen, and the Swiss franc have long been considered safe-haven currencies in the investment community. We study the intra-safe haven currency behaviour between these currencies in crises from 2000 to 2022. Our study is motivated by the recent weakness of the Japanese yen during the early Ukraine war in 2022. Following our quantile regression results, we offer a new econometric model of the interactive crisis dummies. We find that intra-safe haven currency behaviour is time-varying, depending on the nature of the crisis. We contrast ours with the prior literature (e.g., Ranaldo and Soderline, 2010; Fatum and Yamamoto, 2016). Our new findings complement the prior literature and add value to the literature.