BLBG:Dollar to Rise Against Franc on Interest-Rate Gain, RBS S
The dollar may rally versus the Swiss franc as stronger economic growth in the U.S. increases interest rates, according to Royal Bank of Scotland Plc.
Investors should buy the franc and target appreciation to 99.50 centimes, Robert Sinche, global head of foreign exchange strategy at RBS Securities Inc. in Stamford, Connecticut, wrote to clients today. The wager should be exited if the currency pair closes below the 200-day moving average for two consecutive days. The 200-day moving average is currently 88.24 centimes per dollar.
“This is a good entry level for this trade as better data translates in to a stronger dollar via interest rate expectations,” Sinche said in an interview. An internal model shows fair value for the pair to be more than 94, he said.
Stronger-than-forecast employment and manufacturing data have led the dollar to rally against its major counterparts in March. The overnight index swap market is indicating an interest-rate increase from the Federal Reserve in the fourth quarter of 2013, compared with a July 2014 forecast in February.
The yield premium investors get from purchasing 10-year Treasuries versus similar-maturity Swiss debt rose to 142 basis points, or 1.42 percentage points, from 127 basis points at the beginning of the month.
RBS forecast the dollar trade at 95 centimes by midyear before weakening to 90 centimes by December. The franc weakened 0.1 percent to 91.17 yesterday in New York today.
To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
