Swiss ETFs React To Currency News

On Thursday, January 15, the Swiss National Bank unexpectedly reversed course on a policy designed to cap the Swiss franc against the euro. The move is designed to bolster the Swiss currency against other foreign markets ahead of any quantitative easing efforts by the European Central Bank.

Related Link: Swiss ADRs Gain Big As Swiss National Bank Surprises With Currency Revaluation

CurrencyShares Swiss Franc Trust

The CurrencyShares Swiss Franc Trust FXF certainly reacted with the desired effect by shooting over 16 percent higher intra-day. This marked the largest single day advance in the history of this currency-based ETF.

Prior to this announcement, FXF had fallen to its lowest levels in more than three years and lost more than 10 percent in 2014. The tremendous spike in volume is also a notable outlier on the chart below as well.

The devaluation in the euro, Japanese yen and Swiss franc has been a persistent theme over the last twelve months as FX markets have seen a flight to the U.S. dollar. This has pushed the value of the PowerShares DB US Dollar Index Bullish UUP to multi-year highs.

Related Link: Swiss National Bank Lifts 1.20 Barrier On Euro/Swiss, U.S. Dollar Plunges

iShares MSCI Switzerland Index Fund

Another exchange-traded fund that reacted sharply to this news is the iShares MSCI Switzerland Index Fund(ETF) EWL. This ETF tracks 40 large and mid-sized companies domiciled in Switzerland.

Top holdings in EWL include well-known names such as Nestle SA, Novartis AG (ADR) and Roche Holding Ltd. (ADR). This ETF has $976 million in total assets and charges an expense ratio of 0.48 percent.

EWL jumped more than 4 percent intra-day as the home country currency fought to new heights. 

iShares S&P Europe 350 Index

From a broader standpoint, Switzerland is an important investment center in Europe. Swiss stock allocations currently make up nearly 15 percent of the iShares S&P Europe 350 Index (ETF) IEV as the number two country allocation.

This looks to be a strategic move in what will likely be a year marked by further currency turmoil. The change in policy by the Swiss National Bank is one that other nations are going to be watching closely to see how it impacts stock, bond and currency markets worldwide.