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Forex - USD/CHF tumbles after SNB refrains from peg

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Forexpros - The U.S. dollar was down sharply against the Swiss franc on Wednesday, after the Swiss National Bank announced further measures to weaken the franc, but stopped short of pegging the currency to the euro.

USD/CHF pulled back from 0.8016 during early European morning trade, the highest July 29; the pair subsequently consolidated at 0.7873, dropping 1.05%.

The pair was likely to find support at 0.7547, the low of August 12 and resistance at 0.8046, the high of July 28.

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

The SNB added that it would further expand banks' sight deposits at the central bank and that it would take further measures, if needed, against the strength of the Swiss franc.

But the SNB stopped short of pegging the currency to the euro or intervening directly in the currency market, as some had speculated in recent days after comments from Swiss National Bank Vice President Thomas Jordan fuelled speculation over such measures.

"The measures taken thus far by the SNB against the strength of the franc are having an impact, nevertheless, the franc remains massively overvalued," the SNB said in a statement.

Meanwhile, the Swissie found further support after Tuesday's meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy failed to ease concerns over the euro zone's ongoing sovereign debt crisis.

The two leaders proposed a new council to improve the governance of the euro zone and planned to introduce a financial transaction tax in September.

But they fell short of increasing the region's bailout fund, which many feel is inadequate should the debt crisis spread to Italy, Spain or France.

They also rejected issuing euro bonds, saying that the bonds will not solve the single currency bloc's debt issues, disappointing investors who had been anticipating such an action.

Elsewhere, the Swissie was also higher against the euro, with EUR/CHF dropping 1.25% to hit 1.1323.

Later in the day, the U.S. was to publish official data on producer price inflation, as well as government data on crude oil stockpiles.

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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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