Euro leaps after Swiss central bank seen buying

Switzerland's central bank was seen selling francs in Asian trading time on Friday, sending the euro leaping higher after it hit a 15-month low against the franc and helping it rise above an eight-month trough against the dollar. The euro has been under relentless selling pressure in the past month on concerns about sovereign debt problems in the euro zone, first in Greece and then in Spain and Portugal.
Traders said the Swiss National Bank bought euros for francs in a rare foray into Asian trading time, with the central bank said to have traded on trading platform EBS. The euro shot to the day's high at 1.4905 francs on EBS from about 1.4700. It had earlier fallen as far as 1.4551 francs, its weakest level since October 2008, and the market was already wary that it had dropped to levels which might prompt central bank action.
The SNB, which intervened in 2009, has said in the past it would continue to prevent any excessive rise in the franc as long as there were deflationary risks. A spokesman for the central bank declined comment. "Given the SNB has intervened before, it is no wonder if the central bank does it after the recent sharp appreciation," said a trader at foreign bank in Tokyo.
"But it won't change the euro's broad weakness," he said. The euro was later holding at 1.4730 francs, up 0.6 percent on the day. It climbed against the dollar as it jumped against the franc, after hitting $1.3669 in earlier Asian trade, its lowest since late May 2009. It was later trading down 0.1 percent on the day at $1.3711.
The dollar rose 0.7 percent to 1.0738 francs. The euro's weakness was partly attributed to widening yield spreads of Greek, Portuguese and Spanish bonds over German benchmarks. The single currency was also pressured by comments from European Central Bank President Jean-Claude Trichet that many members of the euro zone will have large and sharply rising fiscal imbalances.
"The euro remains on a downward trend for the longer term unless there is a convincing prospect of an improvement in the euro zone fiscal troubles and a sense of relief on the euro returns to the market," said Minoru Shioiri, chief manager for FX trading at Mitsubishi UFJ Securities. The dollar index earlier surged to its strongest in seven months as the euro's early fall accelerated its gains. The index, a measure of the dollar's performance against six major currencies, rose 0.3 percent to 80.122 after touching 80.283, its highest since mid-July 2009.