NEWS / Foreign Exchange

Investica Daily FX Commentary

Swiss franc support

The Swiss franc strengthened late in US trading on Tuesday following rumours of an Iranian missile strike on a US ship in the gulf with USD/CHF dipping to 1.21. Significantly, the franc has also retained a firm tone in European trading on Wednesday.

The Swiss KOF index strengthened to 1.90 in March from a downward-revised 1.81 in February and the domestic fundamentals remain strong which will provide important underlying Swiss franc support.

The testimony from US Fed Chairman Bernanke will be important for USD/CHF on Wednesday. Bernanke is likely to express confidence in moderate US growth and a slow easing of inflationary pressure. Bernanke is also likely to express caution over the housing sector, but also remain optimistic that the economy as a whole will not be seriously affected. Such a stance would be likely to strengthen the dollar slightly.

Markets will also look at global risk aversion levels closely and, despite the market interest in Swiss-franc denominated loans, the franc will strengthen if there is an increase in global risk aversion. Global franc borrowing is now at very dangerous levels which will increase the risk of disorderly repayments and rapid franc gains.