Swiss franc elevated on economy fear, yen on BOJ watch

Dated Posted: 2011-08-05

SINGAPORE, Aug 5 - The Swiss franc hit a fresh record high against the euro on Friday as mounting fear of an economic quagmire in the United States and Europe prompted investors to dump risky assets and seek shelter in safe-haven currencies.

A strongly risk-averse mood supported the Swiss franc, although comments by Switzerland's central bank chief saying he will not accept a further appreciation in the Swiss franc without acting, sapped some of its momentum.

The yen edged higher and pulled away from a three-week low hit the previous day after Japan's yen-selling intervention, but concerns that Japan could intervene again limited the currency's gains.

"I think they're certain to face international opposition to any protracted intervention," said Todd Elmer, a currency strategist at Citi in Singapore.

"But if they want to be successful in introducing two-way risk into the market I think we're going to need to see further action," Elmer said.

A brief spike in the dollar against the yen from around 78.50 yen to an intraday high near 79.40 yen initially stirred talk that Japan may have intervened again.

But the dollar later pared its gains and traders played down the talk of possible intervention, with U.S. and European banks cited as dollar buyers during the spike higher.

Even if Japan were to intervene again, market players said it could be hard for the dollar to rise above the 80 yen to 82 yen area, where dollar-selling interest from Japanese exporters is likely to be strong.

The dollar dipped 0.5 percent against the yen from late U.S. trade on Thursday to 78.49 yen JPY=.

One support level for the dollar lies at 78.27 yen, a 50 percent retracement of the dollar's rise from its four-month low to Thursday's high.

The dollar had risen as high as around 80.25 yen on Thursday after Japan's intervention, which Japan's Nikkei business daily said totalled a record 4 trillion yen.

Japan's solo yen-selling intervention came in the wake of the dollar's drop to a four-month low of 76.29 yen earlier this week, right near a record low of 76.25 yen struck in March.

A focal point is U.S. jobs data due later on Friday.

Many market players feel that a weak reading there could fan speculation that the Federal Reserve may signal the need to take additional easing measures after its policy meeting next week after the Swiss, Japanese and the European central banks took easing steps this week.

SAFE HAVEN BIDS

MSCI's broad measure of Asia-Pacific equities excluding Japan slid 4.6 percent .MIAPJ0000PUS after U.S. shares suffered their worst sell-off since the middle of the financial crisis in early 2009.

With investors shunning risk, the Swiss franc continued to attract safe-haven bids, with the euro hitting a record low of 1.0710 Swiss francs earlier on Friday.

The Swiss franc later retreated after Swiss National Bank Chairman Philipp Hildebrand was quoted by a newspaper as saying he will not accept a further appreciation in the franc without acting.

The euro last stood at 1.0812 francs EURCHF=R, up 0.4 percent on the day. The dollar rose 0.4 percent against the Swiss franc to 0.7663 CHF=, still not far from a record low of 0.7610 hit on Wednesday.

Earlier, the euro slipped to fresh three-week low of $1.4055 EUR= as there was no sign of a let-up in an exodus from Italian and Spanish bonds. The euro later trimmed its losses and was last up 0.1 percent at $1.4103 EUR=.

The European Central Bank surprised many market players by broadening its liquidity operations as it revived its bond buying programme in the secondary market by purchasing Portuguese and Irish bonds.

But some market players said those measures, coupled with comments from ECB chief Jean-Claude Trichet that there were high level of uncertainties, only made investors think that economic conditions in Europe may be deteriorating more quickly than they had anticipated.

 

Source:  Reuters