Morgan Stanley: We believe the US Dollar remains the best safe haven currency.

The U.S. financial services company commonly known as "Big Mo" – Morgan Stanley, released a report this week stating that the Japanese Yen and Swiss Franc are relatively safe choices, but they still believe that in the volatile and uncertain year of 2020, the U.S. dollar remains the best safe-haven currency.

J.P. Morgan's View: Favorable Currency Carry Trades

J.P. Morgan analysts stated in a research report, "We expect the U.S. dollar to be the best safe-haven currency, especially now, as the U.S. dollar interest rates decline, making it a more attractive funding currency for currency carry trades."

Note: Currency carry trade refers to borrowing a low-interest rate currency and then converting it into a high-interest rate currency to profit from the interest rate differential.

They believe that when investors borrow low-interest rate currencies such as the U.S. dollar or Japanese yen and invest in higher-yielding assets elsewhere to earn interest, currency carry trades occur. In times of uncertainty, investors have the opportunity to cash out from high-yield assets and then convert it back to the borrowed currency to make a profit. J.P. Morgan mentioned that currency weakness is crucial for currency carry trades because when investors cash out, they have to repay less money.

Weak Dollar, Rising Gold Prices

J.P. Morgan's argument does not focus on the inflation risk of the U.S. dollar but rather on the analysis of utilizing the arbitrage space of the U.S. dollar based on interest rate differentials.

The public's concern mainly revolves around the Federal Reserve's unlimited quantitative easing policy launched to rescue the stock market and companies. Throughout this year, numerous experts have predicted that this move would trigger severe inflation and concerns about the imminent burst of the stock market bubble. This has also become a topic among Bitcoin advocates, as many believe it presents an excellent opportunity for Bitcoin. We have also seen statements from many traditional investment institutions and publicly listed companies.

However, for most of this year, Bitcoin has shown a positive correlation with the U.S. stock index S&P 500. If the stock market indeed crashes, it will once again test the hedging nature of Bitcoin and the entire cryptocurrency market.