Swiss franc hits record against euro

The Pak Banker - - Company& -

BERN: The Swiss franc strength­ened to a record as the euro slid to 1.2701 francs, fu­el­ing spec­u­la­tion the Swiss cen­tral bank could ex­ploit the paucity of mar­ket liq­uid­ity and in­ter­vene to halt the cur­rency's rise.

"The euro/franc has been on a one-way, down­ward tra­jec­tory for the past month, and this could be get­ting too much for the Swiss Na­tional Bank," said David Kohl cur­rency strate­gist at Bank Julius Baer. "The tim­ing would cer­tainly be per­fect, with liq­uid­ity very thin."

The euro came un­der early sell­ing pres­sure fol­low­ing the steep down­grade to Ire­land's credit rat­ing Fri­day, with in­vestors pil­ing into the safety of the franc on con­cerns the prob­lems could spread fur­ther afield. A re­newed flare-up of ten­sions be­tween North and South Korea also boosted de­mand for the franc, tra­di­tion­ally sought-af­ter in times of cri­sis.

The franc traded re­cently at 1.2721 against the euro, af­ter ear­lier reach­ing a record 1.2701. Against the dol­lar the Swiss cur­rency was last at 0.9666.

The Swiss cen­tral bank in June stepped back from in­ter­ven­ing to try and ar­rest the franc's re­lent­less ap­pre­ci­a­tion, af­ter ac­cu­mu­lat­ing record amounts of euro hold­ings in its cur­rency re­serves.

How­ever, the SNB Thurs­day noted the "re­newed fi­nan­cial mar­ket ten­sions" that were push­ing the franc higher, and warned that should these per­sist and pro­duce de­fla­tion­ary risks, it "would take the mea­sures nec­es­sary to en­sure price sta­bil­ity."

The EUR/CHF's price swings Mon­day come a against a back­ground of thin­ning liq­uid­ity, with many play­ers al­ready hav­ing squared po­si­tions be­fore the Christ­mas break. -PB News

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