Investors did not view the Australian dollar as a safe haven during the global financial crisis, despite the country’s strong economy, new research from Murdoch University suggests.
Murdoch University school of management and governance researcher Ariful Hoque investigated how six major currencies were affected by the crisis, with the research showing that investors viewed the US dollar and Japanese yen as the safest currencies in which to invest.
Dr Hoque said the US dollar was seen as a safe haven investment due to historical stability and autonomy, but said the reasoning behind the support of the yen needed more research.
The Australian and Canadian dollars have historically been more volatile and lower than the US dollar, so their higher valuation during the GFC may not have been viewed as real, Dr Hoque said.
“These currencies also depend much more on other markets, as their economies are tied to the Chinese economy, so with the global instability, investors may have been wondering” ‘if China stops buying, what will happen?’
“That, perhaps, is why investors weren’t using those two currencies as safe havens.”
Dr Hoque said the UK pound and Swiss Franc were likely too close to the crisis for investors to consider them as safe havens.