The Swiss franc made strong gains against the dollar on Wednesday, as concerns about the fallout from the troubles in the US subprime mortgage market weighed on the US currency. The franc also rose against the euro, supported by recent upbeat news from the Swiss economy, which bolstered expectations that Swiss interest rates will continue to rise.
By 0705 the franc was 0.1 percent higher versus the euro at 1.6546 per euro. It rose 0.3 percent against the dollar to 1.1978 per dollar. Concerns that the troubles in the US subprime mortgages market might spread to the wider economy helped the franc, said a trader at ZKB 24h Forex. A letter from Bear Stearns to investors saying that two of its hedge funds that bet heavily on risky subprime loans now have "very little value", added to pressure on the dollar.
"That triggered the latest move in the dollar/franc," the ZKB trader said. A rate of 1.1940 francs per dollar was now the next crucial level. Against the euro, the franc got support from a strong rise in Swiss retail sales in May and new car registrations in June, published on Tuesday, though stabilising financial markets kept its gains in check, UBS analyst Reto Huenerwadel said in a note.
The strong economic data added to the view that the Swiss National Bank will continue to raise its benchmark interest rate of 2.5 percent. But while markets are still pricing in a high probability of more aggressive tightening, most economists see the SNB sticking to its campaign of quarterly 25 basis points increases.
Comments
Comments are closed.