This is an ETF Spotlight on Rydex CurrencyShares Swiss Franc Trust (FXF), part of an ongoing series.
Assets: $820.8 million.
Objective: CurrencyShares Swiss Franc Trust tries to reflect the price movements of the Swiss Franc against the U.S. dollar.
What You Should Know:
- FXF has an expense ratio of 0.40%
- “CurrencyShares Swiss Franc Trust provides pure exposure to the franc’s movements against the dollar,” explain Morningstar analysts in a report on the fund, “but unless used for a specific hedging purpose, it would be suitable only as a small, speculative bet within a diversified portfolio.”
- Investors may also interpret a rising Swiss franc to growing fears over euro zone debt problems.
- “The franc is often seen as a safe-haven currency, but in normal times it has a 87% correlation to the euro and the country has an outsized economic exposure to the pained international finance sector,” adds Morningstar.
The Latest News
- The Swiss franc recently hit a record high against the euro, appreciating 14% over the last year, reports Richard Barley for The Wall Street Journal.
- The Swiss National Bank has tried to stem the rise of the franc by throwing $25 billion into the system to no real effect. The SNB currently does not plan on raising rates from 0.25% as it would only strengthen the franc even further and further damage the country’s export industries.
- Swiss bank UBS calculates that the franc is 10% overvalued against the euro due to the ongoing euro zone crisis.
- “In most cases, a currency’s dramatic appreciation would ignite concerns as investors and analysts debate the detrimental effects it can have on international trade as well as broader economic growth,” says Don Dion at TheStreet.com. “Interestingly, however, any negativity surrounding the franc’s ascent has been largely absent.”
Rydex CurrencyShares Swiss Franc Trust
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Tom Lydon is a board member of Rydex|SGI.
Max Chen contributed to this article.