Risk On

Risk on refers to a market sentiment where traders and investors are more willing to take on risk. In such environment, the prices of high-risk assets such as stocks and commodities tend to rise, while safer assets like the Japanese yen and gold generally see a decline.

The opposite of risk on is risk off, and the two terms are often used together to describe global market sentiment. This concept is also referred to as "RORO" (Risk On, Risk Off).

In the currency markets, risk on assets often include commodity currencies like the AUD, NZD, CAD, and NOK, as well as emerging market currencies like the MXN, ZAR, and BRL.

When market participants are optimistic about the economy's outlook, they tend to bid up the prices of riskier assets. This is what is known as risk on.

On the other hand, when market participants become pessimistic about the economic outlook, or when negative news or increased uncertainty arises, they shift into risk off mode. In this scenario, traders sell off risky assets and turn to safe-haven assets.