The Swiss franc strengthened against major currencies on Friday as markets unwound risky carry trades pressuring the franc, as borrowing rates rise in the wake of the subprime lending crisis. The franc was some 0.1 percent stronger against the euro at 1.6347 francs per euro and had risen 0.13 percent against the dollar at 1.1945 per dollar.
Recent turbulence in global equity and credit markets caused investors to shy away from risk and has triggered an unwinding of carry trades, in which traders borrow the franc to invest in higher-yielding currencies.
"It's a rate story. Carry trades are being unwound," said one Swiss forex trader. The Swiss National Bank offered overnight borrowing rates at 2.6 percent on Friday in an unusual move that added liquidity to the interbank market.
Traders said the SNB had done the same already on Thursday, injecting liquidity at 2.6 percent - below the market rate of 3.0 percent - after the European Central Bank had made a similar move.