Japanese stock markets have tanked this year. America is in the midst of its greatest financial crisis since the Great Depression. And Switzerland? Wait, isn't that the country whose GDP is outweighed by a single one of its now beleaguered banks?
Currency markets don't seem to be thinking quite that way. In recent weeks, investors have sent the value of the U.S. dollar, the Japanese yen and the Swiss franc soaring, but the boost is all relative. Swiss banks, however troubled, are considered safer than debt-ridden European ones, which gives the franc a leg up over the euro. The yen is benefiting from both Japanese insularity from the financial crisis and the unwinding of the carry trade, an arbitrage in which investors borrow in yen to buy in other currencies. As for the dollar, it's still just the most liquid currency, which lends an aura of safety in a storm.