How to Profit from Swiss Central Bank's Efforts to Halt Rise of Swiss Franc

Switzerland's central bank increased its efforts to cool a rising Swiss franc that threatens the competitiveness of the country's exporters. The Swiss franc has become an even more popular safe haven currency in the aftermath of Standard & Poor's downgrade of the United States' credit rating last week. With the United States and several eurozone countries facing unmanageable deficits, traders have been pushing up the value of the Swiss franc, which is backed by a government known for its conservative fiscal management. The Swiss National Bank (SNB) said in a press release that, "the massive overvaluation of the Swiss franc poses a threat to the development of the economy in Switzerland and has further increased the downside risks to price stability. The SNB is keeping a close watch on developments on the foreign exchange market and on financial markets. If necessary, it will take further measures against the strength of the Swiss franc." The announcement by the United States Federal Reserve Chairman Ben Bernanke that he intends to keep interest rates near zero percent at least until the middle of 2013, not to mention the expectation that the Fed will go through another round of Quantitative Easing, also makes the Swiss franc look like a safer bet than the American dollar. As for the euro, the currency is under pressure from traders who fear that a default by either Greece, Portugal, Ireland, Italy or Spain could lead to the demise of the European Union's currency. The Swiss National Bank plans to increase the supply of Swiss francs by rapidly expanding banks' sight deposits at the central bank from the current 80 billion Swiss francs up to 120 billion Swiss francs, and also plans to conduct foreign exchange swap transactions in an effort to increase the Swiss franc's liquidity. . Just a week earlier, the SNB announced that it was increasing sight deposits from 30 billion francs up to 80 billion francs and lowering interest rates to as close to zero as possible. However, the announcement wasn't able to halt the long term climb of the Swiss franc and the Swiss bankers decided that additional measures would need to be taken. In last week's announcement, the Swiss National Bank said that it "will not tolerate a continual tightening of monetary conditions and is therefore taking measures against the strong Swiss franc". The bank is hoping that its announcements will make traders stop pushing up the value of the Swiss currency but many analysts have said that a direct intervention by the central bank may prove to be necessary. Investors who feel that the measures taken by the Swiss National Bank will be successful might want to consider moving some of their assets into the iShares MSCI Switzerland Index EWL ETF or one of the several Swiss stocks that are traded on American stock exchanges. If Switzerland's central bank is able to halt or reverse the Swiss franc's rise, companies like Novartis NVS and Syngenta SYT stand to benefit because their products will become more competitive in the international market. While the measures taken by central bank appear to be working for now, it doesn't change the fact that the United States and eurozone countries like Greece, Portugal and Spain face years of fiscal woes. The efforts of the Swiss National Bank may be in vain if America and the troubled eurozone countries aren't able to clean up their financial messes. If that is the case, than the CurrencyShares Swiss Franc Trust FXF may continue to climb higher as investors seek a currency they can trust.