Over the past five days, the Japanese yen is the only G10 currency to have outperformed the US dollar. The Swiss franc is third in the rankings. The strong performance of these three safe havens sits with the risk-off tone that is engulfing markets. In the view of economists at Rabobank, as a conflict in Ukraine has the potential to create more good shortages and higher inflation, demand for safe haven assets such as the USD, CHF and the JPY has the potential to surge.

Rise in concerns over gas price to enhance the downside bias in EUR/CHF 

“If a Russian invasion of Ukraine does take place the USD, CHF and the JPY would likely spike higher vs a basket of other currencies.”

“Relatively higher yields in the US and the anticipation of Fed rate hikes this year suggests that USD could fare better than the CHF and the JPY if any conflict were extended.”

“Any rise in concerns over gas price in the eurozone is likely to enhance the downside bias in EUR/CHF. We would favour selling rallies near-term with a view to a move towards parity if a conflict was initiated.” 

“A conflict would increase the likelihood of a move to EUR/JPY 128.00 and would likely accelerate a move towards EUR/USD 1.10.”