The end goal for every investor in the foreign exchange market is to generate a good profit. Making money in a favorable market condition is one thing, but doing so in times of decline takes extra effort and strategy. One common approach most investors take is to stick to safe-haven currencies. That is, currencies that are expected to retain their value and rise in price, even during market turbulence. Many factors drive the demand for these categories of assets, and we’ll explore them all below.
Economic and Geopolitical Factors
The last few months have demonstrated why economic and geopolitical factors boost the demand for safer assets. The euro, for instance, has been on its best course in recent months, as the region’s economy has displayed better stability in contrast to other counterparts like the United States and China. The reality has been quite the opposite for the dollar and the Chinese Yuan, both of which are unstable due to the existing tariff war. The EUR hit its 4-month peak against the USD in March 2025, as reported by Reuters, and is still on track for more rallies.
The economic outlook in the United States has been highly uncertain since the Trump administration launched its trade war against other global leaders. Its dispute with China has gathered the most attention, constantly raising doubts in the minds of market investors. While this issue persists, tech and energy stocks have declined drastically, alongside the value of their currency. During economic slowdowns, recession fears, and crises, many investors move away from assets that are more likely to be affected and toward others that are less likely to decline.
Financial Market Volatility
When markets are volatile, the goal for most investors shifts from making money to protecting their capital, and there is no better way to do this than to look to safer assets. Over the past months, the volatility in several financial markets has risen, with tech stocks taking a nosedive and economic instability rising. This explains why currencies like the EUR, Swiss Franc, and Japanese Yen are leading and catching investors’ attention on the MT 4 trading app and other platforms. Commodities have also been doing relatively well, with the Gold price increasing 7.86% over the past months and over 38.01% in the last year.
Another major plus is that the demand for these assets makes it easier for investors to buy or sell during volatile periods, which makes them an excellent choice for traders. There is always a large pool of investors, which makes it easy to sell quickly if things go south or buy swiftly when there is an open profit opportunity.
Liquidity
Liquidity is one rule of investment that traders never take lightly. If a market is highly liquid, it automatically makes it easy to trade quickly and efficiently with minimal price impact. A lot of opportunities come from trading in a highly liquid market, as it also offers tighter bid-ask spreads. That is, it allows investors to transact at lower costs. Prices also tend to be more stable and reliable, with better flexibility. In most cases, safe-haven assets are highly liquid, making them more appealing to traders and less risky in their portfolios.
Monetary Policy
The monetary policy actions taken by central banks often directly impact the country’s currency, so if it’s favorable, investors are more inclined to take interest in such assets. For instance, the Bank of England’s rate cut to 4.25% led to a strong GDP growth of 0.7% in Q1 of 2025, boosting the GBP’s performance in the currency market. We could point to several other instances; they all solidify the narrative that currencies get better market demand whenever the government makes promising decisions in relconcerningary policies.
Leading Safe Haven Currencies in 2025
Some of the best-performing assets in the foreign exchange sector today are EUR, GBP, CHF, and JPY. Several economic factors are driving these performances. One major factor is that these countries haven’t been actively involved in the current trade war initiated by the US government. While the euro area and the United Kingdom also got hit with tariffs, they’ve taken a break from negotiations and have a more stable outlook. The Swiss Franc owes most of its stability and reputation as a stable currency to the European debt crisis 2008. For the Yen, the Japanese trade surplus has significantly boosted its economic positioning. Aside from the current market, other assets like Gold, utilities, and small-cap stocks are also doing relatively well.
What to Watch During Market Declines
The priority in tough market conditions should be safeguarding capital rather than chasing gains. While volatile markets come with opportunities, they’re also a period during which most traders lose a lot. Consider doing more research on some of the assets we’ve listed in this piece and exploring other haven assets. Take extra caution and have a solid risk management strategy to back it up.