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Safe Haven Currencies

Review of Finance, Vol. 10, pp. 385-407, 2010

University of St. Gallen Economics Discussion Paper No. 2007-22

28 Pages Posted: 16 Jul 2007 Last revised: 15 Jun 2013

Angelo Ranaldo

University of St. Gallen; University of St. Gallen - School of Finance

Paul Söderlind

University of St. Gallen; Centre for Economic Policy Research (CEPR); University of St. Gallen - School of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2009

Abstract

We study high-frequency exchange rates over 1993-2008. Based on the recent literature on volatility and liquidity risk premia, we use a factor model to capture linear and non-linear linkages between currencies, stock and bond markets as well as proxies for market volatility and liquidity. We document that the (Swiss) franc and Japanese yen appreciate against the US dollar when US stock prices decrease and US bond prices and FX volatility increase. These safe haven properties materialise over different time granularities (from a few hours to several days) and non-linearly with the volatility factor and during crises. The latter effects were particularly discernible for the yen during the recent financial crisis.

Keywords: exchange rates, high-frequency data, crisis episodes, non-linear effects

JEL Classification: F31, G15

Suggested Citation

Ranaldo, Angelo and Söderlind, Paul, Safe Haven Currencies (September 1, 2009). Review of Finance, Vol. 10, pp. 385-407, 2010 . Available at SSRN: https://ssrn.com/abstract=999382 or http://dx.doi.org/10.2139/ssrn.999382

Angelo Ranaldo

University of St. Gallen ( email )

Swiss Institute of Banking and Finance s/bf-HSG
Unterer Graben 21
St. Gallen, 9000
Switzerland
+41712247010 (Phone)

HOME PAGE: http://www.sbf.unisg.ch/Lehrstuehle/Lehrstuhl_Ranaldo/Homepage_Ranaldo.aspx

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Paul Söderlind (Contact Author)

University of St. Gallen ( email )

Rosenbergstrasse 52
St. Gallen, 9000
Switzerland
+41 71 224 7064 (Phone)
+41 71 224 7088 (Fax)

HOME PAGE: http://https://sites.google.com/site/paulsoderlindecon/home

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

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