The Swiss franc declined against the dollar and euro on concern the nation’s central bank may act to weaken the currency, and after Japan’s pledge to help Europe ease its debt crisis curbed demand for the safest assets.
The Alpine nation’s currency weakened against all but one of its 16 most actively traded counterparts monitored by Bloomberg, losing most against the Swedish krona. Swiss policy makers will hold talks with labor unions and businesses on Jan. 14 to discuss the impact of the franc’s surge on the economy, NZZ am Sonntag reported last weekend, without citing anyone. Werner Abegg, a spokesman for the Swiss National Bank in Zurich, declined to comment when contacted by Bloomberg.
“There is obviously a lot of talk about the SNB possibly going into the market -- people are extremely nervous about it,” Ulrich Leuchtmann, the head of currency strategy in Frankfurt at Commerzbank AG, Germany’s second-biggest lender, said by phone. The franc’s decline below the 1.25 per euro level “was taken as a possible indication that the SNB might be in the market.”
The franc depreciated 1 percent to 1.2655 per euro, the weakest level since Jan. 6, and traded at 1.2650 as of 5:08 p.m. in London. The Swiss currency lost 1.1 percent to 97.84 centimes per dollar before trading at 97.52 centimes per greenback.
Japan Signal
Switzerland’s currency has rallied 17 percent against the common currency in past year as concern the European Union’s debt crisis will worsen stoked demand for the relative safety of the nation’s assets. Though overvalued, the franc’s surge against the euro is a “stamp of excellence” for Switzerland’s strong economic fundamentals, Lombard Odier Darier Hentsch & Cie. said in a client note on Jan. 6.
The franc also weakened today after Japanese Finance Minister Yoshihiko Noda said his country, holder of the world’s second-largest foreign-exchange reserves, will buy part of a bond issue aimed at stemming Europe’s debt crisis. Rising yields on Portuguese bonds may force the nation to follow Greece and Ireland in requesting a bailout from the European Union and the International Monetary Fund to avert default.
“The comments by Japan that they’ll be supportive of euro bonds have reduced the attractiveness of the Swiss franc as a haven asset,” said Kenneth Broux, a senior market economist at Lloyds TSB Corporate Markets in London. Japan’s statement has prompted an “unwinding of short euro positions,” he said.