The conventional wisdom that the haven Swiss franc outperforms during times of risk aversion, while the Australian and Canadian dollars appreciate when risk-seeking investors shift into commodities, has become undone this year as all three currencies have surged against the US dollar and the euro.
Instead, the Swiss franc, Canadian and Australian dollars are being increasingly traded in the foreign exchange markets as they represent an alternative group of ”shadow currencies” for investors wishing to take directional views on the world’s three leading economies: America, China and Germany.
Traditionally, investors used the G3 currencies to bet on the major economies. But the dollar, euro and yen have become an imperfect exchange rate bloc. In Asia, China’s economy has overtaken Japan’s. In Europe, the eurozone encompasses Germany but also distressed members such as Greece. And in the US, the economy remains fragile after the credit crunch.