Why The Swiss Franc ETF is on Fire | ETF Trends

Rydex CurrencyShares Swiss Franc Trust (NYSEarca: FXF) is on an uptrend, as the Swiss franc has been outperforming the euro and the U.S. dollar. The franc related exchange traded fund (ETF) is up over 4% for the past week. So why is the Swiss franc on fire?

According to Rydex, there is a flight to a traditional European safe haven. The Swiss franc is outperforming both the euro and the dollar, and has generally been rising versus the other G10 currencies year-to-date. The threat of deflation has subsided, the economy is stabilizing, and the possibility of credit tightening could improve yield. [ETF Options for Volatile Times.]

Investors are looking forward to Friday’s unemployment report as data on Wednesday showed U.S. companies hired far few workers than expected, while the manufacturing sector is at its lowest point since 2009, reports Antoni Slodkowski for Reuters. The dollar index dipped to 74.306 on Wednesday, the lowest point for the month. [6 Currency ETFs to Diversify from the Dollar.]

“Looking at the recent data I don’t think anyone is really expecting Friday’s U.S. employment data to be strong. Investors have already tried to price in possible low figures on Friday, selling the dollar,” said Sumino Kamei, a senior currency analyst at the Bank of Tokyo-Mitsubishi UFJ.

What the Swiss franc is doing in relation to other currencies:

  • U.S. dollar: U.S. economic hardships, uncertainty to the debt ceiling and a reluctance to tighten credit is causing the dollar to remain depressed.
  • Euro: Several countries that are near default are all connected to the currency that underpins France and Germany. The franc is benefiting from the diversification away from the euro.
  • Yen: Japan’s constant recession, mixed with the disaster of the tsunami is anchoring the yen. The disaster is beginning to form an impact on numerous supply chains on a global level.
  • Pound Sterling: After extreme austerity measures, the Bank of England has been cautious to approach growth.

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

Tisha Guerrero 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.