Yield plays hurt Swiss franc

The US currency will struggle to extend recoveries much above 1.2220 against the Swiss franc.

The Swiss currency weakened to lows beyond 1.6280 against the Euro on Tuesday and also drifted weaker to lows near 1.2230 against the dollar. The franc was struggling to make any progress in early Europe on Wednesday as low-yield currencies remained on the defensive.

Global trends will tend to remain dominant in the short term. The low levels of risk aversion have continued to undermine the Swiss currency over the past 24 hours with a renewed flow of funds into high-yield currencies. Markets will continue to reduce demand for defensive currencies in the very short term, although there are now high risks that the market is underplaying the underlying risks associated with global markets and the economy.

Euro-zone political stresses will tend to rise ahead of the French presidential elections later in April and this will provide some franc support against the Euro, although the near-term impact is likely to be limited.