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Swiss Franc ETF Rises as Banks Charge for Deposits


The Swiss franc, along with its related exchange traded fund, has been gaining strength in the past few months as Eurozone concerns re-emerge, but banks are making aggressive changes to help weaken the currency.

CurrencyShares Swiss Franc Trust (FXF) is up about 3% the past month to its highest level since May.

Recently, UBS AG (UBS), Switzerland’s largest bank, stated that it will begin charging financial institutional clients for cash balances in Swiss francs on Dec. 21, citing “continued prevailing market situation affecting the Swiss franc,” Bloomberg reports.

“We encourage our customers to keep their Swiss franc balances as low as possible,” UBS said in the article.

Since Aug. 2011, UBS has placed a “temporary excess balance fee”  in cash clearing accounts that had net inflows above a certain point.

Last week, Credit Suisse Group AG, the second-largest Swiss bank, said it would start putting negative rates of as much as minus 1% on cash clearing accounts in francs.

Geoffrey Kendrick, head of European currency strategy at Nomura International, points out that the negative rates would allow a lender “to make money” on the deposit accounts.

Since September 2011, the Swiss central bank has kept a cap of 1.20 francs per euro to stem safe-haven investors as a stronger franc would pressure the country’s large export industry.

CurrencyShares Swiss Franc Trust

For more information on the Swiss currency, visit our Swiss franc category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.