Risk Aversion
a.k.a. Flight to safety
A mood where investors shun risky assets and rush for safety, even at the cost of lower returns.
In plain English
A mood where investors shun risky assets and rush for safety, even at the cost of lower returns.
Risk aversion is the market getting scared. Investors dump stocks, high-yield currencies and anything speculative, and pile into safe havens like the US dollar, Japanese yen, Swiss franc and government bonds.
It can strike in minutes after a shock. For forex traders, it often means sharp drops in pairs like AUD/JPY, a classic barometer of fear. It is the flavour of a risk-off day.
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