The Curious Case of the Yen as a Safe Haven Currency: A Forensic Analysis

Botman, Dennis; Filho, Irineu de Carvalho; Lam, W. Raphael

doi:10.2139/ssrn.2365865

Cited by 7 publications

(8 citation statements)

References 7 publications

(6 reference statements)

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“…Extant researchers have identified and acknowledged the safe haven properties of various assets classes, such as commodities including gold (Baur and Lucey, 2010; Ciner et al , 2013), silver (Li and Lucey, 2017) and oil (Elie et al , 2019); sovereign bonds, such as US bonds (Baur and McDermott, 2016), UK bonds (Kinateder et al , 2021) and economic and monetary union bonds (Hassan et al , 2021); and foreign currencies, such as US Dollar (Hossfeld and MacDonald, 2015), Swiss France (Ranaldo and Söderlind, 2010) and Japanese Yen (Botman et al , 2013). However, the sub-optimal performance of these assets during the Global Financial Crisis (GFC) cast doubts on their effectiveness in any future pandemics, prompting researchers to look for alternates, such as Bitcoins (Hasan et al , 2021; Shahzad et al , 2019).…”

Section: Introductionmentioning

confidence: 99%

Is Bitcoin a safe haven? Application of FinTech to safeguard Australian stock markets

Kamran

Butt

Abdel-Razzaq

et al. 2021

SEF

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Purpose This study aims to address the timely question of whether Bitcoin exhibited a safe haven property against the major Australian stock indices during the first and second waves of the COVID-19 pandemic in Australia and whether such property is similar or different in one year time from the first wave of the COVID-19. Design/methodology/approach The authors used the bivariate Dynamic Conditional Correlation, Generalized Autoregressive Conditional Heteroskedasticity model, on the five-day returns of Bitcoin and Australian stock indices for the sample period between 23 April, 2011 and 19 April, 2021. Findings The results show that Bitcoin offered weak safe haven and hedging benefits when combined in a portfolio with S&P/ASX 200 Financials index, S&P/ASX 200 Banks index or S&P/ASX 300 Banks index. In regard to the S&P/ASX All Ordinaries Gold index, the authors found Bitcoin a risky candidate with inconsistent safe haven and hedging benefits. Against S&P/ASX 50 index, S&P/ASX 200 index and S&P/ASX 300 index, Bitcoin was nothing more than a diversifier. The outset of the second COVID-19 wave, which was comparatively more severe than the first, is also reflected in the results with considerably higher correlations. Originality/value There is a lack of in-depth empirical evidence on the safe haven capabilities of Bitcoins for various Australian stock indices during the first and second waves of the COVID-19 pandemic. The study bridges this void in research.

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Section: Introductionmentioning

confidence: 99%

Is Bitcoin a safe haven? Application of FinTech to safeguard Australian stock markets

Kamran

Butt

Abdel-Razzaq

et al. 2021

SEF

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“…This is similar to the US experience in the post-war period. Botman, De Carvalho Filho, and Lam (2013) point out the driver of yen risk-off appreciation appears to be unrelated to capital inflows (cross-border transactions) and also not linked to expectations about the relative stance of global monetary policies. Instead, they show that portfolio rebalancing through offshore derivative transactions occur contemporaneously to yen risk-off appreciations.…”

Section: Related Literaturementioning

confidence: 84%

“…During periods of heightened financial stress, it is well documented that investors re-balance their assets towards so-called safe haven currencies, which are low-yielding currencies that appreciate in times of higher global financial uncertainty (e.g., Habib and Stracca 2012). Traditionally, the US dollar (USD), the Japanese yen (JPY) and the Swiss franc (CHF) are considered safe haven currencies, with Todorova (2020) noting that global investors tend to place their funds in the JPY and the CHF whenever uncertainty arises in the US stock markets or the USD weakens (see also Botman, De Carvalho Filho, and Lam 2013;Ranaldo and Söderlind 2010;De Bock and De Carvalho Filho 2013;Masujima 2017;and Balcilara et al 2020).…”

Section: Related Literaturementioning

confidence: 99%

“…We base our definitions of the risk-off event and episode on a method introduced by De Bock and De Carvalho Filho (2013), which uses the Chicago Board Options Exchange's Volatility Index (i.e., the VIX) as a benchmark. Botman, De Carvalho Filho, and Lam (2013) also use this method. In this method, a risk-off event occurs when the VIX is 10 percentage points higher than its 60-day backward-looking moving average (MA).…”

Section: Stylized Facts On Risk-off Episodes In Safe Haven Financial ...mentioning

confidence: 99%

See 1 more Smart Citation

Risk-Off Shocks and Spillovers in Safe Havens

Beirne¹,

Sugandi²

2022

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We examine real and financial spillovers to safe haven financial flow destinations due to risk-off shocks in global financial markets. Using country-specific structural vector autoregression models over the period 1990 to 2021, we show that dynamics for Japan appear to be different to those of Switzerland and the United States in four main ways. First, in response to risk-off episodes over the estimation period, the yen real effective exchange rate appreciates sharply and significantly, with the effect persisting over time. Second, no significant effects on portfolio flows to Japan are found, in spite of the exchange rate effects, suggesting a rapid adjustment of financial markets to shifts in equilibrium exchange rates. Third, negative real spillovers from risk-off shocks appear to only apply to Japan with exchange rate appreciation exacerbating declines in GDP growth. Fourth, risk-off shocks do not have a statistically significant effect on domestic economic policy uncertainty in Japan, which may be related to the strong expectations priced in of overseas portfolio holdings repatriated back to Japan. Our findings have important implications for policy makers in safe haven destinations in managing domestic financial vulnerabilities associated with risk-off episodes.

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“…As a consequence, a strand of literature that aims at evaluating systemic risk importance and interconnectedness has emerged. In the respective literature, there are many studies done by, among others, Kaul and Sapp (2006), Meurers and Diekmann (2007), Baur and McDermott (2010), Baur and Lucey (2010), Beckmann et al (2015), Bouoiyour and Selmi (2017), Ranaldo and Söderlind (2010), Grisse and Nitschka (2013), Botman et al (2013), andMorley (2014), that account for spillover effects and interconnectedness, but only among traditional assets classes. According to this strand of research, our paper builds on and contributes to extending the literature on Bitcoins by assessing interconnectedness within the cryptocurrency market and between Bitcoin price changes and the volatility of traditional asset classes, using within the group of measures in the literature on the spillover index approach.…”

Section: Literature Reviewmentioning

confidence: 99%