The problems in Europe don’t look like they’ll be resolved any time soon, and wary investors are staying away. As investors flee from European assets, some didn’t go too far, parking their cash in Switzerland and its related exchange traded funds (ETFs).
The Swiss franc is hitting ever higher heights against the euro as currency traders flock to the relative safety of the franc, remarks Ivan Martchev for The Motley Fool. However, the Swiss franc is still down against the U.S. dollar. [Euro’s Loss is Swiss Franc ETF’s Gain.]
In comparison, the yield on the Swiss confederation 10-year bonds has been dropping ever lower, with its current yield at 1.63%, while the yield on 10-year Greek bonds is quickly approaching the 10% mark.
If stronger countries in the eurozone consider leaving the weaker ones, it is widely believed that the rise in the Swiss franc will be swift, Martchev notes. [What’s Influencing Europe ETFs?]
The Swiss National Bank directorate member Jean-Pierre Danthine stated that the danger of deflation in Switzerland has abated, according to The Wall Street Journal. Additionally, the Central Bank isn’t under pressure to raise rates, adds Danthine. The SNB has targeted a 0.25% in the three-month Swiss franc London interbank offered rate.
For more information on Switzerland, visit our Switzerland category.
- iShares MSCI Switzerland (NYSEArca: EWL)
- CurrencyShares Swiss Franc Trust (NYSEArca: FXF): It’s been the top gaining ETF in the last week, up 2.6%
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.