Swiss franc more appealing in carry trades after yen blowup
Investors hope for stability, aided by central bank
Yet safehaven status can lead to big rallies

LONDON, Sept 2 Reuters As investors turn to the Swiss franc as an alternative to Japan39;s yen to fund carry trades, the risk of the currency staging one of its rapid rallies remains ever present.

The Swiss franc has long been used in the popular strategy where traders borrow currencies with low interest rates then swap them into others to buy higheryielding assets.

Its appeal has brightened further as the yen39;s has dimmed. Yen carry trades imploded in August after the currency rallied hard on weak U.S. economic data and a surprise Bank of Japan rate hike, helping spark global market turmoil.

The Swiss National Bank SNB was the first major central bank to kick off an easing cycle earlier this year and its key interest rate stands at 1.25, allowing investors to borrow francs cheaply to invest elsewhere.

By comparison, interest rates are in a 5.255.50 range in the United States, 5 in Britain, and 3.75 in the euro zone.

The Swiss franc is back as a funding currency, said Benjamin Dubois, global head of overlay management at Edmond de Rothschild Asset Management Suisse.

STABILITY

The franc is near its highest in eight months against the dollar and in nine years against the euro , reflecting its status as a safehaven currency and expectations for European and U.S. rate cuts.

But investors hope for a gradual…