The Swiss franc fell against all of its major peers after the central bank unexpectedly cut interest rates to weaken the currency after it strengthened to records and threatened the nation’s economic recovery. The franc dropped the most in more than two years against the euro after touching a record high as the Swiss National Bank said it will increase the supply of the currency to money markets. The yen fell against the euro on speculation the Bank of Japan will add to monetary easing to stem the currency’s advance. The dollar remained lower after Moody’s Investors Service said yesterday the U.S. is still at risk of losing its top credit rating. “This is the first explicit sign from the SNB that they are in an uncomfortable position and that they must do something to hinder the appreciation,” said Henrik Gullberg, a currency strategist at Deutsche Bank AG in London. “It’s difficult to see how they could intervene on their own, but coordinated intervention would be an option,” said Gullberg, referring to joint moves with other nations’ central banks. The franc depreciated 2 percent to 1.1044 versus the euro at 8 a.m. in New York, from 1.0828 yesterday, after falling 2.8 percent, the most since March 12, 2009, when the SNB said it began selling the franc. The franc slid 1.2 percent to 77.13 centimes against the dollar. The Organization for Economic Cooperation and Development’s measure of purchasing power parity suggests the franc is 49.5 percent overvalued against the dollar and 42 percent overvalued versus the euro. Boost in Krona The Swedish krona rose against most major currencies on speculation the country’s economic growth would warrant further rate increases. Its gross domestic product grew more than estimated in the three months through June, increasing a seasonally adjusted 1 percent, data on July 29 showed. The krona strengthened 0.2 percent against the euro at 9.0896 and rose 0.9 percent versus the dollar to 6.3527. The Swiss National Bank lowered its target for the three- month Libor to “as close to zero as possible” from 0.25 percent. The Zurich-based central bank said it will also expand banks’ sight deposits, or cash which can be withdrawn on demand, to 80 billion Swiss francs ($104 billion) from 30 billion francs and repurchase outstanding SNB Bills, according to an e-mailed statement today. Support for Franc The franc has soared 23 percent in the past 12 months, making it the best performing currency among 10 developed-nation peers, according to Bloomberg Correlation-Weighted Currency Indexes. The currency had gained favor as bond yields soared across the euro region’s most indebted nations and Portugal and Ireland followed Greece in requesting international financial assistance. Today’s decline may be short-lived as investors will continue to seek a haven amid signs of slowing global growth, according to Peter Rosenstreich, Geneva-based chief currency analyst at Swissquote Bank SA. The “shot over the bow will inevitably grab headlines and spook traders who were burnt in 2009-2010 foreign-exchange interventions,” said Rosentreich in an e-mailed note. “Should the SNB continue towards an interventionist policy, watch for forex history to repeat itself. When the rhetoric dies down and smoke clears, flows into the franc will continue.” Concern that the euro-region debt crisis will deteriorate and increase stresses in the financial markets will also support demand for the franc, said Ken Dickson, an investment director of currencies in Edinburgh at Standard Life Investments Ltd. Swiss Outlook “Unless you get a resolution to the euro debt crisis, it’s unlikely that negative interest rates in Switzerland will make too much of a difference,” said Dickson, whose company has more than $250 billion in assets. IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, slipped 0.6 percent to 74.082 after Moody’s said yesterday the U.S. credit rating may be cut for the first time. The U.S., rated Aaa since 1917, was placed on a negative outlook. Moody’s confirmed the rating after President Barack Obama signed into law a plan to lift the nation’s borrowing limit and cut spending. The dollar deprecated 0.7 percent to $1.4298 versus the euro, from $1.4203 yesterday. The yen weakened 0.6 percent to 110.21 per euro and was little changed at 77.07 per dollar. Companies in the U.S. added 100,000 workers in July after a 157,000 increase in June, according to the median forecast of economists before a report from ADP Employer Services today. U.S. payrolls climbed by 85,000 workers last month after an increase in June of 18,000, the smallest this year, according to the median forecast of 81 economists in a Bloomberg News survey before the Labor Department’s report Aug. 5. To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Emily Blewett in London at eblewett@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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