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Swiss Franc

Swiss Franc is the Only Safe Haven Currency

According to conventional market wisdom, there are three safe haven currencies: the Swiss Franc, Japanese Yen, and US Dollar. It is to these currencies that investors flock whenever there is a crisis, or merely an outbreak of uncertainty, and for much of the period following the collapse of Lehman Brothers, the three were closely correlated. As you can see from the chart below, however, one of these currencies has begun to distinguish itself from the other two, leading some to argue that there is now only one true safe haven currency: the Swiss Franc.

How to Trade the Franc-Yen-Dollar Correlation

Last week, the Wall Street Journal published an article entitled, “Currency Correlations Lose Their Way for Now.” My response: It depends on which currencies you’re looking at. I, too, recently posted about the break-down of multi-year correlations, specifically involving the Australian Dollar and the New Zealand Dollar. However, one has to look no further than the Swiss Franc to see that in fact currency correlations are not only extant, but flourishing!

Swiss Franc at Record Highs

This month, the Swiss Franc touched a record high against not one, but two currencies: the US dollar and the Euro. Having risen by more than 30% against the former and 20% against the latter, the franc might just be the world’s best performing currency over the last twelve months. Let’s look at the prospects for continued appreciation.

Has the Swiss Franc Reached its Limit?

The second half of 2010 witnessed a 20% rise in the Swiss Franc (against the US Dollar), which experienced an upswing more closely associated with equities than with currencies. It has managed to entrench itself well above parity with the Dollar, and has become a favored destination for investors looking for a safer alternative to the Euro. Still, there are reasons to wary, and it could be only a matter of time before the CHF bull market comes to a screeching halt.

Swiss Franc Surges to Record High(s)

In the last two weeks, the Swiss Franc rose to record highs against not one, but two major currencies: the US Dollar and the Euro. The Franc is now entrenched well above parity against the former, and is closing in on the magical level of 1:1 against the latter. With market uncertainty projected to run well into 2011, continued strength in the Franc is all but assured.

Swiss Franc Touches Record High, Nears Parity

In the year-to-date, the Swiss Franc has risen 3% against the Dollar, 15% against the Euro, and more than 5% on a trade-weighted basis. It recently touched a record low against the Euro, and is closing in on parity with the USD. Since the beginning of the summer, the Franc has rallied by an unbelievable 15% against the Greenback. I don’t think I’m alone in scratching my head in bewilderment wondering, What could possibly be behind the Franc’s rise?

SNB Abandons Intervention

The Swiss National Bank (SNB) has apparently admitted (temporary) defeat in its battle to hold down the value of the Franc. ” ‘The SNB has reached its limits and if the market wants to see a franc at 1.35 versus the euro, they won’t be able to stop it.’ ” The markets have won. The SNB has lost.

Swiss Franc Surges to Record High: Where was the SNB?

One of the clear victors of the Greek sovereign debt crisis has been the Swiss Franc, which has risen 5% against the Euro over the last quarter en route to a record high. 5% may not sound like much until you consider that the Franc had hovered around the €1.50 for most of 2009.

SNB: Intervention Back on the Table

Pull up a 1-year chart of the Euro against the Swiss Franc, and you’ll quickly notice a salient trend: the exchange rate has hovered slightly above €1.50 since last March, with three notable deviations. The first occurred last March, when the Swiss National Bank (SNB) intervened in currency markets on behalf of the Swiss Franc, causing the Franc to shoot up instantly by more than 5%. The second took place in June, when the SNB threatened (it may or may not have actually intervened) intervention again, and the Franc shot up in order to create a buffer zone.

SNB Could Intervene…Again

After a brief “hiatus,” the Swiss Franc is once again rising, and is now dangerously close to the $1.50 CHF/EUR “line in the sand” that spurred the last two rounds of Central Bank Intervention.

Both from the standpoint of the Swiss National Bank (SNB) the Franc’s appreciation is vexing, while from where ordinary investors are sitting, it’s downright perplexing. That’s because based on the standard litany of factors, the Franc should be falling.

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