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Forex - EUR/CHF to retest record low on French debt fears

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Forexpros - The euro turned lower against the Swiss franc on Wednesday, surrendering gains made after the Swiss National Bank announced further measures to weaken the franc, as fears over a possible French downgrade weighed on the single currency.

EUR/CHF retreated from 1.0523, the daily high, to hit 1.0306 during U.S. morning trade, slumping 0.51% on the day.

The pair was likely to find support at 1.0066, Tuesday's low and the all-time low and resistance at 1.0842, Tuesday's high.

French President Nicolas Sarkozy met with Bank of France Governor Christian Noyer earlier in the day, as well as with a number of government ministers to discuss the country's economic and financial situation.

The meeting comes amid mounting concerns that France's top-tier AAA credit rating could be downgraded if the euro zone sovereign debt crisis worsened.

Adding to concerns, shares in French lenders Societe Generale, BNP Paribas and Credit Agricole plunged 14%, 9% and 8.3% respectively on the CAC 40 index.

Meanwhile, the Swiss National Bank said earlier that it would take additional measures, including increasing liquidity to the money market and conducting foreign exchange swap transactions to curb recent gains in the Swissie.

"The massive overvaluation of the Swiss franc poses a threat to the development of the economy in Switzerland and has further increased the downside risks to price stability," the SNB said in a statement.

The central bank added that it would keep a close watch on developments in the currency market and take further measures if necessary to counter the rise of the franc.

Elsewhere, the euro was also lower against the yen, with EUR/JPY plunging 2.08% to hit 108.33, the lowest since March 17.

The yen's strength prompted Japanese Finance Minister Yoshihiko Noda to say that he would continue to closely watch movements in the currency market.

Noda added that he was in contact with leaders from the Group of Seven nations about foreign exchange rates, a possible sign that Tokyo was considering further measures to curb gains in the yen.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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