Swiss Franc ETF Barrels Higher Despite Rate Cut

August 5th at 11:40am by Tom Lydon

An exchange traded fund pegged to the movement of the Swiss franc against the U.S. dollar rose to a new high Friday even after the Swiss National Bank cut interest rates this week and warned it would intervene to cool the currency’s rise.

CurrencyShares Swiss Franc Trust (NYSEArca: FXF) was up 0.6% in recent trading. [Investors Seek Safety in Swiss Franc]

Japan’s central bank was intervening in currency markets this week in a bid to force the yen lower. [Yen ETF Creeping Higher After Intervention]

The Japanese government sold yen and pledged to inject $126 billion into its economy, reports Aki Ito and Keiko Ujikane for Bloomberg. The yen briefly crossed over the $80 per dollar mark for the first time since July 12 in foreign market trading.

On Tuesday, the Swiss Central Bank cut interest rates and stated that it will increase the supply of the franc currency in money markets. [Investors Seek Safety in Swiss Franc ETF; Volume Rises.]

Dismal economic data from the U.S. and Eurozone has pushed investors to safe-haven currencies, such as the yen and franc, which has consequently sent the currencies to record highs. [Risk Aversion Sends Traders To Safe-Haven Currencies, ETFs.]

“What you’re seeing now is policy makers responding because it’s beginning to hurt their overall economic prospects,” commented Richard Jeram, chief economist at Bank of Singapore, “particularly in the case of Japan, where the economy is pretty vulnerable after the March earthquake.”

Both the Swiss and Japanese economies have strong export industries, and the strength of their domestic currencies determines the competitiveness of their exports in foreign markets.

CurrencyShares Japanese Yen Trust (NYSEArca: FXY)

CurrencyShares Swiss Franc Trust (NYSEArca: FXF)

For more information on the yen or franc currencies, visit our Swiss franc or Japanese yen categories.

Read the disclaimer; Tom Lydon is a board member of Rydex|SGI.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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