Yen, Swiss Franc ETFs Rally After S&P Downgrade

August 8th at 3:22pm by Tom Lydon

The safety trade was in full force Monday, including currency exchange traded funds as investors favored ETFs pegged to the Swiss franc and Japanese yen after Standard & Poor’s cut its triple-A credit rating on the U.S. by one notch.

CurrencyShares Swiss Franc Trust (NYSEArca: FXF) rose 1.4% in afternoon trading to yet another record high, while CurrencyShares Japanese Yen (NYSEArca: FXY) added about 1%.

Yet the PowerShares DB US Dollar Index Bullish (NYSEArca: UUP) rose fractionally thanks in part to weakness in the euro. CurrencyShares Euro Trust (NYSEArca: FXE), declined 0.5%.

The Swiss franc ETF has been rallying despite the Swiss National Bank recently cutting interest rates and threatening to intervene in currency markets. The currency is seen as a safe haven in times of financial distress. [Swiss Franc ETF Barrels Higher Despite Rate Cut]

Currency ETFs have seen trading volume ramp higher over the past week, especially the Swiss franc fund and CurrencyShares Australian Dollar Trust (NYSE: FXA), which has dropped sharply along with commodity prices.

“The daily headlines are very currency-fueled these days, and the volatilities in related ETFs are unprecedented,” said Paul Weisbruch, head of ETF/options sales and trading at Street One Financial.

CurrencyShares Swiss Franc Trust

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

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