Swiss Franc ETF Rises Despite SNB Jawboning

March 14th at 9:39am by John Spence

CurrencyShares Swiss Franc Trust (NYSEArca: FXF) rose Thursday despite the Swiss National Bank reiterating its pledge to keep the franc low to help its exporters and economy.

“The Swiss franc is still high. An appreciation of the Swiss franc would compromise price stability and would have serious con sequences for the Swiss economy,” the SNB said.

The central bank has set a limit on the Swiss franc of 1.20 versus the euro.

“The minimum exchange rate is an important instrument in avoiding an undesirable tightening of monetary conditions. The SNB will therefore enforce this minimum rate with the utmost determination and, if neccessary , is prepared to buy foreign currency in unlimited quantities for this purpose,” the central bank said, adding it “stands ready to take further measures at any time.”

FXF, the Swiss franc ETF, saw a huge one-year rally starting in mid-2010 as investors nervous over Europe’s debt crisis flocked to the safe-haven currency. The SNB was forced to take action to cool the franc’s rise.

For example, FXF topped out at $139.91 a share in August 2011. The currency ETF’s 2010 low was $85.13 a share, so the fund experienced a 64% rally. FXF closed at $103.15 on Wednesday.

The SNB has nearly doubled its currency holdings to shield the country from the fallout caused by the Eurozone debt crisis, Bloomberg News reports.

The central bank did lower its inflation forecast on Thursday.

“The inflation path is being shifted down, but overall the picture stays the same,” said Alexander Koch, an economist at UniCredit, in the Bloomberg article. “Since the cap was set in 2011, their stance has been relatively unchanged. They’ve made clear that the ceiling is not for fine-tuning, and I expect the SNB’s stance to continue.”

CurrencyShares Swiss Franc Trust

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The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. 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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