The Swiss franc traded within a 100th of a cent of a record high against the EUR on concern Europe's debt crisis will spread, boosting demand for the safest assets. The Swiss currency appreciated as much as 0.5% to a record amid speculation the Swiss National Bank ( SNB ) may be stepping back from its policy of selling the franc to stem its appreciation.
The SNB tends to increase its interventions in the markets in an attempt to weaken the Swiss Franc. The moves are seen best against the Euro since the Swiss economy is based on exports - Switzerland has a surplus in its trade balance. The main trading partners come from the Euro-Zone - Germany, France, Austria and Italy, all of which border the Alpine nation. A weaker Swiss currency means more value for exports.
In the current crisis, the Japanese Yen and the US Dollar played this role. The Swiss Franc on the other hand tends to move by speculators and the performance of the Swiss economy, which is doing well without interventions. The Swiss National Bank still wants it to fall. But despite the SNB's efforts, the currency is still strong. The Swiss Franc used to be a "safe-haven" currency that is sought in times of trouble, are things changing?
- The market has finally managed to take out key support by 1.4000 to accelerate to fresh record lows with targets 1.3855 & 1.3785 in extension. While we do not rule out the potential for a rebound, the continued downside pressure may push the CHF to 1.35 per EUR within 3 weeks.
EUR/CHF Weekly Chart