The Swiss franc strengthened to a record versus the dollar as concern that policy makers are failing to stem the European debt crisis, coupled with a U.S. credit-rating downgrade, boosted demand for the safest assets. The franc extended its year-to-date gains against all of its 16 major peers tracked by Bloomberg. It stayed higher versus the euro even as the European Central Bank was said to buy Italian and Spanish bonds to tame surging borrowing costs. The Swiss cabinet has convened an extraordinary session today to discuss the strength of the currency, TSR television reported, after the Swiss National Bank last week cut interest rates in an attempt to curb its advance. “The Swiss franc is the gauge of how nervous the market is,” said Jane Foley, a senior foreign-exchange strategist at Rabobank International in London. On today’s ECB buying, “we have seen the euro reverse some of those losses against the Swiss. But we all know that doesn’t solve the European debt crisis. It’s just buying time and it remains the case that the politicians haven’t convinced the market.” The franc advanced 0.8 percent to 76.11 centimes per dollar as of 9:01 a.m. in London, after appreciating to a record 74.85 centimes. It strengthened 0.3 percent to 1.0917 per euro. Swiss lawmakers meet today amid concern the strength of the franc may hamper economic growth and cramp exports, which account for more than half the economy. The Swiss central bank unexpectedly cut rates on Aug. 3 to fight currency gains that have seen the franc surge 18 percent against a basket of nine developed-market peers, according to Bloomberg Correlation- Weighted Currency Indexes. Central Bank Measures The SNB “knew last week that they were swimming against the tide, and unfortunately that still remains the case,” said Foley. “The next few weeks and months are going to be crucial for the euro and throughout that period most investors aren’t going to want to dump their Swiss positions.” The ECB today bought Italian and Spanish government bonds, according to five people with knowledge of the transactions. It isn’t buying Irish or Portuguese bonds, said one of the people, who asked not to be identified because the deals are confidential. A press officer for the ECB declined to comment. Swiss unemployment remained at the lowest in 2 1/2 years in July as companies boosted their workforce to meet global export demand. The jobless rate held at 3 percent when adjusted for seasonal swings from June, the State Secretariat for Economic Affairs in Bern said in an e-mailed statement today. That’s the lowest since January 2009 and in line with the median forecast of 11 economists in a Bloomberg News survey. To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net. To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.

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