The US dollar showed further weakness today, as the New York Manufacturing index plunged to minus 8.7 in June — a bigger decrease than forecast.

The greenback was already under pressure as soaring eurozone inflation boosted expectations of an imminent rate hike by the European Central Bank.

As market uncertainty feeds into exchange rate volatility, currency expert Sean Hyman suggests two safe havens in The Offshore A-Letter…

The big name traders are dumping assets into the Swiss franc and gold. Remember when I said the euro gained against almost every currency out there? Well one currency that’s still beating the euro (even in the thought of a Eurozone rate hike) is the Swiss franc.

That’s right. The euro actually lost ground against the Swiss franc in these days of uncertainty. In fact, the Swissie even gained against the euro on the day that Trichet hinted at a rate hike. Normally that would send the euro soaring across the board and it almost did.

Though I couldn’t help but notice on these days where the money was flowing. It never ceases to amaze me. Once, the mighty Swiss franc was backed by gold so it was an obvious safe haven for traders. But today, the Swiss franc is not necessarily “safer” than any other currency.

Yet traders instinctively still run to this currency just as if it were backed by gold in uncertain times. So that’s one of the “safety zones.” Not because it’s one in reality but because it’s still treated as one by traders.

However, you can tell when that confidence and faith erodes where it really goes…the oldest currency in the world, dating back 2,000 years…

That’s right, none other than gold itself. Everything else is a piece of paper backed by confidence/faith in its government.

After reaching over US$1,030 (which was way over done for the moment by the way), gold has pulled back to its 200-day moving average region. That gives gold a healthier shot to launch upward once again in these uncertain times.

So there are your two “safety zones” when money gets scared. Gold is the safety zone in times like these and the Swiss franc is a place where traders instinctively go out of habit.

Should more uncertainty persist (and believe me it could in these days of stagflation), then expect more money flows into the Swiss franc and into gold.