Risk-On / Risk-Off

Risk-on / risk-off (often shortened to RoRo) describes the way markets swing between two broad moods. In risk-on phases, investors favour higher-yielding and growth-sensitive assets — equities, commodity currencies such as the Australian dollar, and emerging-market currencies. In risk-off phases, money rotates into assets perceived as safer, including the Japanese yen, the Swiss franc, the US dollar, and government bonds. For forex traders, the prevailing mood often matters as much as any single country's data, because whole groups of currencies move together when sentiment shifts. Traders gauge the regime by watching equity indices, volatility measures, and bond yields, and by noting whether safe-haven currencies are strengthening or weakening across the board.