An exchange traded fund that tracks the movements of the Swiss franc versus the dollar has become less desirable as a safe-haven asset after the Swiss National Bank pegged the currency to the euro currency. Now, currency traders are worried that the central bank may take further actions in weakening the franc.
CurrencyShares Swiss Franc Trust (NYSEArca: FXF) was up 0.5% at last check Friday, and is down 13% over the past three months.
Ever since the Swiss National Bank took actions to weaken the Swiss currency by pegging the franc to the European euro, the Swiss franc has been closely mirroring movements in the euro against the U.S. dollar, lessening the currency’s appeal as a safe-haven asset. Uncertainty in Europe has sent the franc sliding alongside the euro.
“This is clearly a reflection of the ‘fear,’ if you like, that the SNB are going to raise the floor – and I do think those fears are founded,” Bank of New York Mellon currency strategist Neil Mellor, said in an Reuters report.
Earlier this week, the SNB threatened to take greater action to curb the currency’s strength.
On Sunday, SNB Chairman Philipp Hildebrand stated that the central bank will take greater action if deflationary pressures warrants it.
In a conference meeting on Monday, Finance Minister Eveline Widmer-Schlumpf stated that the cap on the Swiss franc has helped the economy and the bank will “take the necessary steps, if they are needed,” report Catherine Bosley and Emma Thomasson for Reuters.
CurrencyShares Swiss Franc Trust
For more information on the franc, visit our Swiss franc category.
Read the disclaimer; Tom Lydon is a board member of Rydex|SGI.
Max Chen contributed to this article.