Swiss franc still under pressure

10 Jul, 2007

The Swiss franc remained under pressure on Monday, trading slightly weaker against the dollar and near flat against the euro as investors pursued their carry trade strategy. The franc has weakened in recent months as investors make use of the differential between Switzerland's relatively low short term benchmark interest rate of 2.50 percent and the 4.00 percent in the euro zone to fund carry trades by borrowing the franc.
"The euro/franc is tentatively creeping higher. Taking into account the aggressive tightening expectations markets are already pricing into the short end of the franc curve and with equity markets on the rise, such an outcome can only be considered a mild surprise," said UBS economist Reto Huenerwadel.

Read Comments