Out of the Swissie and into the Yen

Climb Mount Niitaka!

I bought the Swiss franc currency ETF (FXF) back in December as a diversification away from US dollars. Lately, however, I have become concerned about the exposure of the big Swiss banks, and the extent of the Swiss National Bank's (SNB) bailouts. See this Guardian article for details.

However, I was really shocked to read this article on "quantitative easing" (aka "currency debasement"), based on a report by Credit Suisse. In particular, this quote:

The SNB has indicated its willingness to use QE and has explicitly mentioned FX intervention as a means to achieve its objectives.

So much for traditional Swiss conservatism! While Credit Suisse still infer that the Swiss franc is likely to hold up better than the US dollar, or (especially) the pound, it is reason enough for me to dump FXF, which I have done today at $87.35/£60.73 (in sterling terms, virtually a flat performance on purchase, but obviously a dollar loss).

Rather than leave the cash in US dollars, however (of which I have a considerable pile), I've decided to go for the other major currency - the Japanese Yen. To quote Credit Suisse again:

[Japanese] QE’s implementation was unsuccessful earlier in the decade and the BoJ is very reluctant to allow rates to return to zero. Following the Fed’s lead, it is now starting to try to improve domestic credit mechanisms, but remains hampered by residual weaknesses in the domestic financial system and appears unwilling at this point to seek to resolve them aggressively.

I don't view this as a high-return play, but have bought a big chunk of the CurrencyShares Japanese Yen Trust (FXY) at $112.44/£78.17.

P.S. Just to give you a warm feeling about our nation's future, I'll leave you with another quote from Credit Suisse:

The pound has weakened sharply in anticipation of QE ... GBP is vulnerable to QE because attempting to underpin a leveraged national balance sheet through sovereign debt expansion is inherently unstable given the threat of domestic capital flight ... while the US is still master of its own destiny, in the UK, QE is insufficient to fix the problem.