Swiss Franc Depreciates on Financial Turmoil

August 18 00:00 2011

New York, August 18 (thealphareporter.com) – The Swiss franc has weakened 0.7 percent to 1.1474 francs per euro and 0.9 percent to 79.71 centimes per dollar this morning in London. It is anticipated that this depreciation will continue in the coming days in order to curb its gains in the past three months. It had risen 11.6 percent this year out of which a gain of 9.3 percent had taken place in the last three months. According to Bloomberg Correlation weighted Currency Indexes, the Swiss currency has been the top gainer among the 10 currencies of developed nations.

During periods of financial stress, the franc strengthens because its export-reliant economy does not need foreign capital for balancing current accounts. Traders feel that the Swish franc’s depreciation is the result of the intervention of the central bank in the forwards market in order to protect the exporters. Apart from depreciation, the bank is also considering taking further steps like making a temporary currency peg to the euro and boosting liquidity to the money market.

The depreciation of the Swiss franc is the outcome of the current fiscal crisis that is affecting Europe due to which investors are looking for safer havens in a strong currency other than the euro. Chris walker, currency strategist at UBS feels that the Swiss National Bank has been in the FX swap market and the depreciation of the franc against the euro will continue towards parity.

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