BLBG: Swiss Franc Falls to Nine-Month Low Versus Dollar on Europe Debt Concern
The Swiss franc weakened to a nine- month low against the dollar as concern regional leaders are failing to resolve the sovereign debt crisis damped demand for assets linked to Europe.
The Swiss currency dropped against 11 of its 16 major counterparts after German Chancellor Angela Merkel was said to have rejected raising the upper limit of funding for the European Stability Mechanism, the region’s permanent bailout fund. The franc strengthened earlier as investors bet the nation’s central bank will refrain from weakening the currency at a policy meeting this week.
“The franc move has a lot to do with the growing skepticism surrounding Europe’s rescue plan,” said Elizabeth Gregory, a market strategist at Swissquote Bank SA in Geneva. “This week we were primed for the possibility that the Swiss National Bank would raise the euro floor at Thursday’s meeting, but that would be folly if it looks like confidence in Europe is heading for another nasty downturn. It looks like eurozone credibility is once again on the rocks.”
The Swiss currency fell 0.5 percent to 94.20 centimes per dollar at 4:28 p.m. London time after dropping to 94.38, the weakest since Feb. 22. It earlier gained as much as 0.3 percent. The franc appreciated 0.2 percent to 1.2332 per euro.
Merkel told German coalition lawmakers that the 500 billion euro ($654 billion) cap on Europe’s planned permanent bailout fund will stay in place, two officials with knowledge of the discussion said. She also confirmed the limit on the ESM as agreed by European Union leaders at a summit last week, the officials said on condition of anonymity.
SNB Meeting
The SNB meets on Dec. 15, with nine of 13 economists surveyed by Bloomberg News forecasting it will keep the franc’s ceiling at 1.20 per euro.
The franc also weakened after the State Secretariat for Economic Affairs in Bern revised down this year’s economic growth forecast to 1.8 percent from a September prediction of 1.8 percent.
The Swiss currency has weakened 3.2 percent in the past three months, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies.
The central bank introduced the ceiling on Sept. 6 to curb the franc’s gains as investors fleeing the European debt crisis pushed the currency to a record high of 1.01 per euro on Aug. 9.
To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
