Swiss Franc ETF Gains on Euro Woes

January 28th at 6:00am by Tom Lydon

The Swiss franc exchange traded fund is rising again despite efforts by the country’s central bank to keep a lid on the currency.

While the Swiss currency and related ETF strengthen after ratings agencies downgraded many European countries, Switzerland’s economic minister says the Swiss franc will depreciate over the mid-term.

CurrencyShares Swiss Franc Trust (NYSEArca: FXF) is up about 2% year to date. The fund tracks the movement of the franc relative to the dollar.

Swiss National Bank chief Philipp Hildebrand recently resigned amid a furor over currency trades made by the central banker and his wife. [SNB Chief Steps Down]

Last year, the SNB moved to cap the strength of the franc versus the euro. The spike in the Swiss franc last year was weighing on the country’s exporters and the economy. [Currency Intervention Weighs on Swiss Franc ETF]

The euro dropped to a fourth-month low against the Swiss franc last week, according to Reuters.

However, Switzerland’s economic minister Johann Schneider-Ammann believes the Swiss franc will depreciate to about 1.40 francs per euro in the mid-term, reports Silke Koltrowitz for Reuters.

“My minimum expectation is that the Swiss National Bank keeps the lower boundary of 1.20 (francs per euro),” Schneider-Ammann told Swiss newspaper SonntagsZeitung Sunday. “In the midterm I expect purchasing parity to be reestablished. It lies at about 1.40 francs per euro.”

The Swiss National Bank pegged the rate at 1.20 francs per euro on September 6 after the safe-haven currency strengthened and threatened to pull the exporting economy into recession.

“The risk of a deindustrialization is still there at 1.20. Smaller and midsized companies cannot invest or replace staff,” Schneider-Ammann added.

More recently, the Swiss franc has gained additional strength against the euro, which Schneider-Ammann has attributed to ratings firms’ downgrades.

“The downgrades by rating agencies that have led to uncertainty, pushing many towards the Swiss franc,” the economic minister said.

CurrencyShares Swiss Franc Trust

For more information on the Swiss currency, visit our Swiss franc category.

Read the disclaimer; Tom Lydon is a board member of the funds for 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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