MW: Swiss franc weakens slightly, but remains lofty versus euro, dollar
The Swiss franc edged lower against major crosses in choppy European trade on Monday, but remained at historical highs, as investors turned their focus to the European Central Bank meeting this week.
The Swiss franc hovered around parity against the euro, holding onto a 16% year-to-date gain against the single European currency after last week’s unexpected decision by Switzerland’s central bank to drop its euro peg. The franc EURCHF, +1.46% was last down 1% to 1.0044 francs. Against the dollar USDCHF, +1.37% it was down 0.8% to 0.8659 francs — a 13% drop year-to-date.
Among other currency pairs, the euro EURUSD, +0.23% was at $1.1599, from $1.1567 late Friday in New York. The moves come ahead of a closely monitored policy meeting at the European Central Bank on Thursday, at which it may introduce a large-scale bond-buying program.
Meanwhile, the yen strengthened against other major currencies in Asia Monday. A tumble in Shanghai stocks deepened the cautious mood, pushing investors into the safety of the Japanese unit.
The greenback USDJPY, -0.19% was at ÂĄ117.26, after dipping to ÂĄ116.92 earlier in Asia. The dollar was at ÂĄ117.61 late Friday in New York, buoyed by strong U.S. consumer sentiment data and a recovery in U.S. Treasury yields.
On Monday, the dollar had difficulty following on from this momentum, as some selling by Japanese exporters for commercial-transaction settlements kept a lid on upward movement. Selling pressure then forced the dollar down after the sharp fall in Shanghai stocks spread gloom around the market.
The Shanghai Composite Index SHCOMP, -7.70% lost the most in more than six years, as Chinese regulators took steps to curb margin trading at several of the country’s largest brokerages. The Shanghai index closed down 7.7% to 3116.35.
Swiss franc fallout? “The headlines come at a time when market participants still don’t know to what extent the impact of the Swiss franc is spreading,” said Mizuho Bank forex sales senior vice president Michiyoshi Kato.
“Headlines were popping up, and investors responded (by selling), but then moved to cover their short positions. It looks this is not something that will have a lasting effect,” said Kato, who expects the dollar will likely move in a ¥116 to ¥118 range this week.
The Japanese currency was also stronger against other rival currencies. The euro EURJPY, +0.06% was lower at ÂĄ136.03, compared with ÂĄ136.07 Friday, while the Australian dollar AUDJPY, -0.39% fell to ÂĄ96.42 from ÂĄ96.87.
Kato said many market participants were taking a wait-and-see stance, after last week’s unexpected 30% surge in the Swiss franc resulted in huge losses for banks, brokerages and individuals.
Technical charts show there still remains a potential risk of a downside bias for the dollar against the yen, said Osamu Takashima, chief FX strategist at Citigroup Global Markets Japan,said in a note.
“We will continue to remain cautious about the dollar’s downside against the yen, in spite of the rebound over the weekend,” said Takashima, pointing to a risk of the pair falling below ¥115 over the short term.
Takashima said there were mixed signals over risk sentiment globally. While stock markets in the U.S. and Europe are showing signs of recovery, oil prices are still drifting low around $50 a barrel.
The WSJ Dollar Index BUXX, -0.04% a measure of the dollar against a basket of major currencies, was down 0.1% to 83.86.
