Swiss Franc Rallies Despite Positive Market Sentiment

The Swiss franc advanced yesterday and kept its gains today even though the market sentiment was favorable to riskier currencies, not safer ones.

The week started with positive mood on the Forex market that was favorable to higher-yielding currencies. And it was surprising to see the Swissie rallying with them not only against the safe currencies, but also versus the euro. It’s true that the Swiss currency lost much of its attractiveness as a refuge after the central bank intervened, pegging the franc to the euro, but the Swissie still retains its safe-currency habits.

The traders who bought the franc may be rewarded in the long run as the problems of the global economy, and particularly the problems of Europe, hasn’t gone away and demand for safety is likely to return. Moody’s Investor Service warned about a negative impact of the indecisiveness that the European leaders are demonstrating. The rating agency warned that the debt ratings of the European countries are in danger:

While Moody’s central scenario remains that the euro area will be preserved without further widespread defaults, even this ‘positive’ scenario carries very negative rating implications in the interim period. The rating agency notes that the political impetus to implement an effective resolution plan may only emerge after a series of shocks, which may lead to more countries losing access to market funding for a sustained period and requiring a support programme.

USD/CHF traded today near 0.9229 as of 1:33 GMT, while yesterday it fell from 0.9275 to 0.9224. EUR/CHF dropped yesterday from 1.2357 to 1.2287 and traded today at about 1.2290, while CHF/JPY was at 84.71, following yesterday’s advance from 83.56 to 84.51.

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