WSJ:WORLD FOREX: Norwegian Krone Rises To 8-Year High Versus Euro
--SNB franc floor move continues to ripple through currency markets
--Norwegian krone looks set to benefit
--Euro volatile after German Constitutional Court ruling
--Polish, Canadian central bank interest rate decisions due
By Clare Connaghan
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--The Swiss National Bank's decision to set a floor for the euro/franc exchange rate continued Wednesday to send ripples through currency markets, driving the Norwegian krone to an eight-year high against the single currency as market participants sought alternative safe havens to the Swiss franc.
The euro fell to as low as NOK7.4884 against the krone as investors piled into the Norwegian currency for a second day running, following the SNB's decision Tuesday to set a minimum exchange rate of CHF1.20 to the euro.
"The krone will benefit most from the SNB move, we think," said currency strategists at Morgan Stanley in London. "Some real money funds have to keep minimum exposure in Europe and, with most other European currencies discredited, the krone offering 3% returns for three-month money market holdings stands out," they said.
The Australian and Canadian dollars are also expected to benefit.
"It's more than likely [the SNB] are going to buy a lot of euros initially, then they will want to diversify part of these reserves into other currencies, most probably into the dollar, Australian dollar, yen and Canadian dollar to begin with," said Peter Kinsella, a currency strategist at Commerzbank AG.
Elsewhere, the Swedish krona also gained ground, rising to its strongest level against the euro since June after the country's central bank left its key interest rate unchanged, while signaling that rate increases will continue, albeit at a slower pace.
More broadly, the euro was volatile against the dollar after Germany's Federal Constitutional Court ruled that the euro zone's 2010 bailout for Greece and the subsequent aid granted through its rescue fund are legal.
That eliminated a major hurdle to the currency bloc's debt crisis response but, for some in the market, this didn't change the outlook for the euro.
"The constitutional court decision doesn't change the fact that the European economy is markedly slowing or change the dynamics of the ongoing sovereign debt crisis??????and this should have the effect of ending the hiking cycle of the European Central Bank," Kinsella said.
The dollar was steady against the yen, after Japanese finance ministry officials quashed any ideas that Japan may follow the Swiss central bank in trying to place a ceiling on the value of its currency.
Looking ahead, the spotlight turns to the Bank of Canada's interest rate announcement at 1300 GMT. In emerging markets, Poland's central bank is due to deliver an interest rate decision. Both banks are expected to remain on hold.
At 1101 GMT, the euro was trading at $1.40508 against the dollar, compared with $1.3997 late Tuesday in New York, according to trading system EBS. The dollar was at Y77.205 against the yen, compared with Y77.66, while the euro was at Y108.476 compared with Y108.70. The pound was at $1.5982 against the dollar, compared with $1.5946 late Tuesday in New York.
The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 75.601, compared with 75.929 late Tuesday in New York.
