Financial Analysts Journal· 2026Q1
Flight to Safety or Flight from Carry?
- 1citations
- Q1SCImago
- 2026year
Short summary
Global institutional investors' currency flows during market stress reveal that the CHF, JPY, and USD can act as safe havens, but their roles diverge, with the USD attracting inflows during crises like the GFC and geopolitical shocks, while the JPY was central to a 2024 carry crash.
AI-generated from the title and abstract; the full text is not read.
Key points
- CHF, JPY, and USD can attract inflows during market stress, but their roles as safe havens or funding currencies diverge.
- USD inflows were observed during the Global Financial Crisis and geopolitical shocks.
- The JPY was central to a 2024 carry crash.
- Carry demand was a larger driver of flows than safe-haven demand around Liberation Day.
- The distinction between carry and safety-driven flows is increasingly important due to rising USD rates.
AI-generated from the title and abstract; the full text is not read.
Abstract
This paper examines the distinction between safe-haven and funding currencies during periods of market stress, focusing on how global institutional investors allocate across currencies during crisis episodes. Using FX forward and sovereign bond flows from a major custodian bank, the study finds that while the CHF, JPY, and USD often attract inflows during crises, their roles can diverge. For example, the USD saw inflows during the Global Financial Crisis and major geopolitical shocks, while the 2024 carry crash centered on the JPY. A panel regression framework using institutional investor flows is developed to classify crises as either flights to safety or flights from carry. Carry was a larger factor than safe-haven demand in driving flows around Liberation Day. The distinction between carry and safety driven flows has become more important in recent years as USD rates have risen while those on CHF and JPY instruments have remained low.
The authors' abstract, as published at the source. Financial Analysts Journal, 2026 · DOI ↗
Continue with a free account
Ask the paper: 3 free questions a day about this paper; save it, get its citation, new summaries every day for your field. Takeaways are Premium.
Continue free on the webSign in with Google or Apple; no card needed. You come back to this paper.
On your phone:
Field: Finance
FinanceEconomics, Econometrics and Finance