Current-account surpluses back in favour as currency traders search for safe havens

London

THE shakeout in global markets is sending currency traders back to basics.

All five of the major currencies to have strengthened against the dollar in the past month - from the euro and yen to Sweden's krona - are from economies that enjoy a surplus in their current accounts, or broadest measures of trade.

Analysts say that's the key quality making these currencies the best havens from the turmoil pummelling global markets. The focus on countries' balance of payments is reminiscent of the late 1990s and early 2000s, before cheap money and interest-rate differentials came to dominate foreign-exchange markets.

"In times of expansion and risk seeking, current-account surpluses or savings are not always seen as a virtue," said Stephen Jen, London-based managing partner at SLJ Macro Partners LLP and a former International Monetary Fund economist. "But in contraction and risk aversion, it's seen as a factor that helps determine how good an asset might be as a safe haven." The strength of the trend is unde…