How to Invest in the Swiss Franc

The Swiss Franc as a Safe Haven

The Swiss franc has long been considered a safe haven investment. During the eurozone debt crisis in 2011, there was a high demand for the Swiss franc that forced the Swiss National Bank to peg its currency to the euro at a rate of 1.20 euros per franc. This was done to prevent harm to their own economy and export sector.

Compared to other safe havens like gold, the Swiss franc is widely available and has high liquidity. It is backed by a strong Swiss economy, which is in turn considered one of the leading banking business hubs in the world. Many institutional investors and governments prefer to use the Swiss franc for this purpose, while individual investors often focus on other assets.

The reputation of the Swiss franc as a safe haven was put to the test in 2011 when Switzerland pegged its currency to the euro to stabilize its economy. Many large foreign exchange brokers and investors faced losses amounting to billions of dollars, leading to their bankruptcy. Since then, some individuals have become hesitant to invest in the Swiss franc due to the central bank’s volatility.

Investing in the Swiss Franc Using ETFs

Those wishing to invest in the Swiss franc can easily do so by using exchange-traded funds (ETFs) that trade on U.S. stock exchanges. The most popular Swiss franc ETF is the Invesco CurrencyShares Swiss Franc Trust (FXF).

Created by CurrencyShares, it is designed to track the price of the Swiss franc against the U.S. dollar. There are several advantages to using an ETF instead of buying Swiss francs in the spot foreign exchange market. These include:

• Ease of purchase: ETFs can be bought using traditional brokerage accounts. Shares trade daily on the NYSE Arca.
• Reasonable margin: ETFs can be used in margin accounts. This means you can leverage your positions, but at a lower margin percentage than in the spot currency market.
• Lower costs: ETFs trade as securities. This means the costs are much lower than those in the spot currency market.

Trading the Swiss Currency in the Forex Market

The forex market is another option for purchasing the Swiss currency. This involves borrowing one currency (A) to buy another currency (B). This trade is then closed to realize a profit or loss in the future. Profit is achieved when the price of currency B increases compared to currency A, while losses occur when the opposite happens.

In the forex market, one of the most popular Swiss currency pairs is USD/CHF. Traders who expect the Swiss currency to rise will sell or short this pair – that is, invert the order and use the U.S. dollar to buy the Swiss franc. This is done with very high leverage of up to 10,000:1 to profit from small pip movements (a fraction of a cent).

Although the Swiss currency is considered a good investment, you should carefully consider the risks, especially when using leverage, before committing any capital.

Source: https://www.thebalancemoney.com/swiss-currency-how-to-invest-in-and-buy-swiss-francs-1978923