Potential intervention of the Japanese yen has driven currency traders to another safe-haven currency: the Swiss franc ETF.
The Swiss franc has appreciated to a record high against the U.S. dollar, gaining against the greenback for the sixth day in a row on a pessimistic outlook for the U.S. economy, reports Stephen Morris for Bloomberg. Currency traders like the franc in times of financial and economic uncertainty since the Swiss economy is viewed as stable.
The Swiss National Bank had sold francs last year to ward off deflation and boost exports, but in this June, the Central Bank will end the policy after the fear of deflation has abated.
Switzerland’s economy seems to be weathering its stronger currency very well. Only a few Swiss companies are hurting as a result of stronger franc, mostly those in the manufacturing industry, while some companies have even reported a slightly positive effect, writes Catherine Bosely for Reuters. It may not last for long, however: Switzerland’s Central Bank projects a slowdown of the economy in 2011 as a result of the strong franc.
- CurrencyShares Swiss Franc Trust (NYSEArca: FXF) is up 4.6% in the last month
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Read the disclaimer: Tom Lydon is a board member of Rydex|SGI.
Max Chen contributed to this article.