King Dollar? The Swiss Franc May Become the World's Currency

Includes: FXC, FXE, FXF, FXS, FXY, UUP
by: Gary Gordon

Oil has been stealing the mainstream media headlines. And quite frankly, the Libya-inspired surge in crude should be the lead story.

However, there’s a far more intriguing “back-pager” that investors need to know about. The Swiss franc hit an all-time high against the U.S. dollar on Thursday. Note: You may want to look at the trend for Currency Shares Swiss Franc (NYSEARCA:FXF).

We’re not just talking about gains against the devalued greenback; rather, an alternative currency became the currency of choice during geo-political upheaval in the Middle East and North Africa.

Consider the handful of successful investments during the worldwide financial collapse in 2008. Safe-haven seekers won with gold, the Japanese yen and the U.S. dollar. Similarly, troubled by the sovereign debt crisis in early 2010, investors looked to the U.S. dollar for comfort.

During turmoil and uncertainty in 2011? Safety-seekers still went for the yen and gold, but they boycotted the greenback. In fact, they outright sold the world’s reserve currency.

Now, there are those who are attempting to explain how the threat of an oil catastrophe is ”dollar negative.” Or, in essence, higher import prices for oil would hit U.S. growth and productivity more so than anywhere else on the planet. Yet if you accept this reasoning, why didn’t the dollar get utterly cremated when oil doubled from $75 to $150 per barrel from 1/1/08-6/30/2008?

The situation becomes even murkier when you take into account that the dollar reached a three-week low against the European Union’s euro. The euro, for Peter, Paul and Mary’s sake ... in the middle of ongoing sovereign debt issues.

It may be time for some folks to take a harder look at Fed policy and the U.S. dollar. Even the European Central Bank is more concerned about inflation and tighter monetary policy.

Granted, dollar devaluation throughout the past decade has been a boost for stocks as well as commodities. It’s not been bad for U.S. manufacturing/exports either. Nevertheless, one shouldn’t ignore Swiss Franc “exceptionalism.” Currency Shares Swiss Franc (FXF) is up 1.5% over one month and 7% over three months.

Here is how a number of currency ETFs have fared over one month and three months:

Approx 1 month % Approx 3 month %
CurrencyShares Swiss Franc (FXF) 1.53% 7.16%
CurrencyShares Canadian Dollar (NYSEARCA:FXC) 1.49% 3.14%
CurrencyShares Swedish Krona (NYSEARCA:FXS) 0.73% 8.23%
CurrencyShares Japanese Trust (NYSEARCA:FXY) 0.58% 2.12%
CurrencyShares Euro Trust (NYSEARCA:FXE) 0.51% 3.22%
PowerShares DB Dollar Bullish (NYSEARCA:UUP) -0.89% -3.81%
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Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.