Japanese yen and Swiss franc top hedges against Trump tariffs, according to analysts

Investors are flocking to safe haven assets after U.S. President Donald Trump announced a swathe of reciprocal tariffs last week — and some are looking at the Japanese yen, bonds, as well as a few other “exotic” assets.

“The Japanese yen will be a good — and probably the best — candidate to hide from trade tensions and a U.S. recession, for a whole host of familiar reasons,” said Ebrahim Rahbari, head of rates strategy at Absolute Strategy Research.

“It is cheap, the likely decline in U.S. interest rates will narrow the rate differentials to the yen, and even though Japan is a prominent exporter, its overall reliance on trade is lower now, particularly as fiscal policy has been loose,” he told CNBC via email.

The yen has strengthened around 3% against the greenback since April 2, according to data from LSEG. Rahbari added that the Swiss franc is another “obvious candidate” as an investment hedge. The franc has likewise appreciated over 3% to 0.8522 against the U.S. dollar. Those moves come as other currencies around the world weaken.

Another strategist echoed the view that both the yen and the Swiss franc are among the best options for cushioning the impact of Trump’s tariffs.

“Both the Japanese yen and Swiss franc are good currencies to help mitigate the visceral reaction of the market to tariffs,” said Matt Orton, head of advisory solutions and market strategy at Raymond James Investment Management.

But Orton expects the Swiss franc to act as a better hedge than the yen, given the uncertainty surrounding the path of Bank of Japan’s rate hikes.

The yen usually outperforms in times of global recessions or crisis, said Jeff Ng, head of Asia macro strategy at Sumitomo Mitsui Banking Corporation. “Even if the world avoids a hard landing, [the yen] may also do well as the BOJ will possibly hike further against a wave of central bank easing,” he said.

However, he warned that Japan’s economy is also facing headwinds from Trump tariffs, particularly from tariffs on automobiles and components. And a slowing economy would mean that the BOJ will be more inclined to keep rates low, keeping the yen weak.

A more interesting question is whether there could be more “exotic” hedges aside from the classic safe havens, said Rahbari, who named the Brazilian real as an option.

“The idea being that it is cheap, has high carry and that it is relatively less exposed to global trade,” said Rahbari, adding that the real has been one of the major outperformers in currencies this year.

Investors have also been piling onto cash, as well as low-risk fixed income options such as Treasurys and bonds.

Bond yields have also been declining, reflecting a rising demand for bonds, with the benchmark 10-year U.S. Treasury bond yield falling 6% from April 2 to a low of 3.873% on Monday.

Japan’s 10-year government bond yield plunged to a low of 1.05% on Monday, a 28.52% drop from April 2’s close of 1.469%. This is also the lowest the 10-year JGB yield has been since December 2024.

Risk-off positioning has been dominating markets as participants sell stocks in favor of Treasurys, gold bars, greenback futures, crude oil barrels, volatility call options, equity index put derivatives, and forecast contracts, said José Torres, senior economist at Interactive Brokers.

Gold prices rose to a record high in the immediate aftermath of the reciprocal tariff announcement. Though they have fallen a bit since then, prices of the safe haven darling remain at elevated levels. Market watchers expect it will have more room to run as global markets remain on edge.

“Gold remains boosted by escalating trade uncertainties, heightened geopolitical tensions, a weaker U.S. dollar, increasing central bank purchases, and rising risks of recession,” said BMI analysts.

SMBC’s Ng said gold is usually a safe haven during financial crisis, noting that demand from private households and governments remains resilient. Nevertheless, he says, “prices are stretched on the upside.”

The reasons behind gold’s stellar start to 2025 are only stronger now that Trump has announced his tariffs, said Adrian Ash, director of research at BullionVault.

“Weaker trade, higher input costs and shrinking margins are badly hurting the stock market, while geopolitical mistrust is deepening. Such a gloomy outlook for economic growth offers the perfect backdrop for further gains in gold,” he said.

U.S. equities capped off a brutal week for investors last Friday, down 9.08%, according to data from FactSet, as Trump’s moves stoke more calls of a global economic slowdown. JPMorgan, for instance, raised the odds for a U.S. and global recession to 60% by the end of the year, up from 40% previously.

“There’s no bid for equities right now,” said Raymond James Investment Management’s Orton.