TORONTO -(Dow Jones)- The climb in the Swiss franc continued Friday, with the currency smashing through previous record highs to drive the euro below the psychologically significant CHF1.35 level.
The Swiss currency's long-running rally has accelerated of late after the Swiss National Bank stepped back last week from its policy of seeking to hold it down, a stance it reiterated Monday.
Broad-based euro weakness and a fresh burst of general nerves are giving fuel to the move. Late afternoon the euro was trading at CHF.3491, up from its most recent all-time low at CHF1.3456.
Until the central bank sees evidence that the strong franc is fuelling deflation by making imports cheaper--an unlikely prospect at this point--it is expected to allow the currency to keep on rising. That marks a sharp contrast to the SNB's heavy-duty program of buying euros to slow the franc's ascent in recent months.
"The combination of risk sentiment being pulled back and the euro declining is toxic for the Swiss franc," said Michael Hart, a currencies analyst at Citigroup in London.
The rapid rise in the Swiss currency is likely to test the SNB's new policy, and fresh intervention cannot be ruled out, Hart said. "Either way though, intervention would likely provide only a temporary reprieve from Swiss franc appreciation in the context of relatively healthy fundamentals," he said.
Chart-watching technical strategists at Barclays Capital suggested Wednesday that over the long term, the risk of the euro falling to parity against the Swiss franc "cannot easily be dismissed."
-By Katie Martin, Dow Jones Newswires; 44-20-7842-9346; katie.martin@dowjones.com
(Karen Johnson in Toronto contributed to this article.)
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=onFASm%2FbgfZnBI0h0pWzNw%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
No comments:
Post a Comment