Currency traders like to say that currencies are always in a “bull market.” That’s partially true. What’s closer to the truth is you can always find at least one currency that’s outperforming the stock, commodity and bond markets at any given time.

For example, over the past weekend Lehman’s, AIG’s and Merrill Lynch’s troubles took a bite out of the dollar’s performance. But while the dollar dipped, two currencies continued to rise - including the Japanese yen and Swiss franc.

This is pretty typical of currencies during this type of market…

Traditionally, there are currencies that prosper during tough times, even during recessions and depressions. These “recessionary” currencies are beaten down during recovery periods.

Traders scorn these currencies when other markets are soaring because no one wants their “paltry interest” and smaller growth, when they can get higher returns elsewhere.

However, when markets start to fall, currency traders grab these currencies with both hands to save their portfolios. That’s exactly what happened this weekend. The so-called “weakest currencies” paying paltry interest rose, while the high-yielding currencies like the Australian and New Zealand dollar sank

To recap: During stock bull markets, currency investors are busy buying up high-yielding currencies and continually selling low interest yielding currencies. But when bad times hit, currency investors quickly trade in their high-yielding currencies for the safety of the ‘beaten-down dog’ currencies like the Japanese yen and Swiss franc.