Risk-on and risk-off in forex

How it works

During periods of stress, capital can move toward highly liquid assets or currencies perceived as safer; during calmer periods, investors may seek higher-yielding exposure.

What to check

Treat the labels as descriptions, not fixed rules. Correlations can change, and a currency's domestic policy or commodity exposure can outweigh global risk sentiment.

• Use the labels cautiously
• Check current correlations
• Separate global and domestic drivers

Limits and risks

Building trades around permanent 'safe haven' assumptions can fail when the underlying drivers change. Check actual market relationships rather than relying on old labels.