Goldman Says Yen and Franc Stand to Gain If Trade Woes Slow FDI

(Bloomberg) -- The yen and franc could benefit if global trade conflicts spur a slowdown in cross-border direct-investment activity, according to Goldman Sachs Group Inc.

Japan and Switzerland are the largest global sources of foreign direct investment, so a cooling could stymie outflows from both and buoy their currencies, strategist Zach Pandl wrote in a note to clients dated Thursday. Conversely, currencies of nations that tend to be FDI recipients could be weighed down.

He points to Israel, Australia and Brazil as places that could face headwinds, as they receive annual FDI equivalent to more than 4% of gross domestic product. He also said Mexico could see slower inbound investment if trade uncertainty continues, while the FDI outlook for China would depend partly on capital-account regulation.

With uncertainty over tariffs and other economic concerns roiling markets, the Swiss franc has been the best-performing Group-of-10 currency over the past month, rising 2.6% against the dollar. The yen is the second-strongest, up around 2.1%.

To contact the reporter on this story: Benjamin Purvis in New York at bpurvis@bloomberg.net

To contact the editors responsible for this story: Paul Dobson at pdobson2@bloomberg.net, Mark Tannenbaum

©2019 Bloomberg L.P.