RTTN: Swiss Franc Recovers Early Losses Against Most Majors
In early European trading on Tuesday, the Swiss franc recovered its early Asian session's downtrend against most major currencies. The franc thus climbed from a 2-month low against the dollar, 4-week low against the pound and a 4-day low against the yen. Against the euro, the franc ticked up today.
The Swiss Federal Statistical Office announced today that consumer price inflation slowed to 0.1% in January from 0.7% in December. Inflation slowed for the fourth month in a row. Economists were looking for 0.6% inflation for the month. The consumer price index dropped 0.8% month-on-month in January, double the 0.4% fall forecast by economists.
Meanwhile, the Swiss National Bank said the maximum volume of assets to be transferred by the UBS to the SNB stabilization fund, which was set up to realize UBS assets will decrease to US$39.1 billion from its original level of approximately US$60 billion.
In accordance with the agreement announced on October 16, 2008, the UBS will finance 10% of the transfer amount. Owing to the reduction of the overall amount, the maximum risk to be borne by the SNB has declined considerably, to roughly US$35 billion.
The SNB and UBS have agreed not to transfer certain categories of assets like securities backed by student loans and assets that have been wrapped by monoline insurers.
In early trading on Tuesday, the Swiss franc advanced against the euro. At about 4:35 am ET, the euro-franc pair hit 1.5025, compared to yesterday's close of 1.5139. The immediate resistance level for the Swiss currency is seen at 1.483.
The French and the Italian industrial production reports, which were released today likely influenced the European currency.
French industrial production declined 1.8% month-on-month in December, slower than November's revised 2.8% fall. The decline in December matched economists' expectations. Meanwhile, manufacturing output in December dropped 2.8% on a monthly basis compared to a revised decrease of 3.6% in November. Economists were looking for a monthly 2.2% fall.
Italy's unadjusted industrial production dropped 12.2% year-on-year in December, after falling 12.7% in November. The decline was severe than the expected fall of 11.3%. Production dropped for the eighth straight month.
The franc gained against the dollar after hitting a 2-month low of 1.1783 at 10:40 pm ET Monday. The dollar-franc pair that closed yesterday's deals at 1.1640 is currently worth 1.1616. On the upside, the franc is likely to target the 1.151 level.
