4 ETFs to Replace the Swiss Franc

NEW YORK (TheStreet) -- Thanks to the intervention by the Swiss National Bank, the Swiss franc has been cast from the spotlight. In the days and weeks ahead, it will be interesting to see what will step up to become the next big-name investor safe haven.

For months, the Swissie had held the throne as a defensive destination for droves of jittery investors seeking shelter from the troubled euro. ETF investors seeking ways to gain exposure to the franc were able to use the CurrencyShares Swiss Franc Trust ( FXF) to get their fix.

As global investors clamored for access, the currency and FXF powered along a steep upward path, breaking through previous records and sparking the attention of the Swiss government.

Fearing the negative effect a strong currency can have on economic growth, the SNB intervened in the franc's atmospheric ascension at the start of the month, announcing that it would take dramatic steps to halt its climb. Following the move, the franc has tumbled, while the FXF has retreated to its 200-day moving average, returning nearly all of its summertime gains.

It is unclear what the long-term impact the SNB's intervention will ultimately have on the franc. However, in the initial aftermath, investors have begun to turn to other corners of the currency markets in hopes of finding relief. The U.S. dollar and Canadian dollar have each been mentioned as possible replacements.

Initially, the greenback appears to have become the biggest beneficiary to come from the franc's downfall. In the opening days of September, shares of the PowerShares DB U.S. Dollar Index Bullish Fund ( UUP) have soared, recovering back to levels seen at the start of April.

Despite this climb, questions loom about the longevity of its rise. Continued loose monetary policy on the part of the Federal Reserve could quickly stifle the dollar's gains.

The Loonie has not seen the same short term run up as the U.S. dollar. However, given Canada's relative stability and the looming threat of action from the Fed, investors may find it to be an attractive destination in the near term. The CurrencyShares Canadian Dollar Trust ( FXC) allows ETF investors to follow its action.

The road ahead for Canada's currency is not without its challenges. High energy prices have played an important role in buoying the nation's currency. Therefore, in the event that slowing economic growth leads to weakness in the commodities market, the CAD will face ample hurdles.

While the USD and the CAD appear promising, any exposure to these currency players should be kept small and watched closely.

Investors hesitant towards trying their luck with another currency may find gold to be an attractive post-franc destination. Unlike the UUP and FXC, I have traditionally viewed physically-backed bullion ETFs like iShares Gold Trust ( IAU) and SPDR Gold Shares ( GLD) as long-term portfolio staples. This precious metal will likely bode better for individuals looking to construct a buy-and-hold-style line of defense.

With global economic turmoil commanding headlines on a seemingly daily basis, the need for protection remains essential for a well-balanced portfolio. There are a variety of evergreen options for those looking to construct a shield against upheaval. However, as we have learned from the situation involving the Swiss franc, flexibility is always crucial.

Written by Don Dion in Williamstown, Mass.

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At the time of publication, Dion Money Management owned iShares Gold Trust and CurrencyShares Canadian Dollar Trust.

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