Bloomberg reports that a recent Societe Generale study indicates
that investors are losing confidence in the Swiss National Bank's
ability to hold the franc's peg at 1.20 to the euro past June of
this year. Should this prove true, investors in the iShares MSCI
Switzerland Index Fund (NYSEArca:EWL) stand to benefit in the short
term from the franc's potential appreciation against the
dollar.
In a move similar to the yen, demand for the franc has increased
as investors pull away from the euro region and seek traditional
safe-haven currencies. Demand for the franc is so strong that
yields on six-month government notes actually turned negative
recently, Bloomberg reported.
Hopes don't seem to be too high for the currency in the long
run, however. The Bloomberg article cites an Amundi executive who
argues that the franc may depreciate to 1.35 per euro over the next
six months, calling it overvalued. As Swiss companies like Roche
report lower sales due to the rising franc, pressure will be on the
Swiss National Bank to act quickly and forcefully in maintaining
its promise of curbing or reversing the franc's appreciation.
Yen Bounces Back As Investors Seek Safe Haven
In related news, the yen bounced back last week as investors
sought the safe-haven currency in the midst of further concerns
over the European debt crisis and China's slowing growth.
Like the Swiss, the Japanese central bank has made efforts to
curb the yen's appreciation. However, the yen rallied 1.78 percent
last week, bringing enhanced returns to U.S. investors in
Japan.
MSCI Country
Indices
|
Local
Currency
|
1 Week
|
3 Months
|
12 Months
|
| USD |
Local |
FX
Impact |
USD |
Local |
FX
Impact |
USD |
Local |
FX
Impact |
| Australia |
AUD |
0.67% |
0.09% |
0.58% |
5.38% |
4.52% |
0.86% |
-10.20% |
-8.83% |
-1.36% |
| China |
HKD |
1.07% |
1.01% |
0.06% |
7.05% |
6.94% |
0.11% |
-15.58% |
-15.74% |
0.16% |
| Hong Kong |
HKD |
-0.33% |
-0.39% |
0.06% |
10.62% |
10.51% |
0.11% |
-8.37% |
-8.55% |
0.17% |
| India |
INR |
-3.17% |
-2.50% |
-0.67% |
8.42% |
8.20% |
0.22% |
-24.54% |
-12.80% |
-11.74% |
| Indonesia |
IDR |
-0.84% |
-0.52% |
-0.33% |
3.29% |
3.97% |
-0.68% |
4.70% |
10.59% |
-5.90% |
| Japan |
JPY |
0.47% |
-1.23% |
1.70% |
6.85% |
12.40% |
-5.54% |
2.20% |
-1.36% |
3.56% |
| Korea |
KRW |
-1.79% |
-1.13% |
-0.66% |
10.56% |
9.28% |
1.28% |
-6.81% |
-2.78% |
-4.02% |
| Malasya |
MYR |
0.70% |
0.26% |
0.44% |
7.22% |
4.44% |
2.78% |
3.83% |
4.83% |
-1.00% |
| New Zealand |
NZD |
1.35% |
0.37% |
0.98% |
14.52% |
9.96% |
4.56% |
9.93% |
5.55% |
4.37% |
| Philippines |
PHP |
1.36% |
1.05% |
0.31% |
14.80% |
11.97% |
2.83% |
19.96% |
18.41% |
1.55% |
| Singapore |
SGD |
0.88% |
-0.03% |
0.91% |
12.10% |
8.16% |
3.93% |
-5.14% |
-5.74% |
0.59% |
| Taiwan |
TWD |
1.25% |
1.31% |
-0.06% |
11.22% |
9.49% |
1.73% |
-9.31% |
-7.83% |
-1.48% |
| Thailand |
THB |
-0.53% |
-1.16% |
0.62% |
18.33% |
14.66% |
3.67% |
7.02% |
9.44% |
-2.42% |
The iShares MSCI Japan Index Fund (NYSEArca:EWJ) returned -0.57
percent, while the local MSCI Japan Index returned -1.23 percent.
Investors in the Maxis Nikkei 225 Index Fund (NYSEArca:NKY) saw
returns of 0.35 percent, while the local Nikkei Index returned -
1.9 percent at the end of the week.
Japanese equities have rallied through much of 2012, but the
yen's depreciation has taken a bite from the returns of U.S.
investors in Japan. However, last week's performance may signal a
shift in the trend:As investor concern about countries like Spain
and Italy increase, the yen may strengthen as an alternative
safe-haven currency.
On Monday morning, the euro reached its lowest level against the
yen since February, after Spanish and Italian 10-year bonds yields
rallied. As the European debt crisis continues, U.S. investors with
Japanese exposure stand to benefit if the yen continues on its
rally. For those unwilling to take the currency risk, funds like
the WisdomTree Japan Hedged Equity Fund (NYSEArca:DXJ) and the db-X
MSCI Japan Currency-Hedged Equity Fund (NYSEArca:DBJP) are viable
alternatives that hedge against currency movements.
More information and data on currency performance is available
in the Index Universe Currency Impact Report.
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