Tags: swiss | franc | US | dollar

Swiss Franc Seen Usurping Dollar

By    |   Tuesday, 01 Dec 2009 08:22 AM

The Swiss franc is taking over the dollar’s role as the world’s safe-haven currency.

Already the buck has dropped to a 19-month low of 1 franc, thanks to Switzerland’s relative economic strength and its current account surplus.

Swiss franc futures and options contracts on the Chicago Mercantile Exchange show that traders expect the trend to continue.

Contracts betting the franc will rise against the dollar totaled 25,333 on Nov. 10, more than 10 times the number betting on a drop by the franc, according to the Commodity Futures Trading Commission.

The difference was the highest since December 2004.

“There’s very substantial underlying demand for Swissie (the franc), generated by one of the developed world’s largest current account surpluses,” Paul Meggyesi, a currency strategist at JPMorgan Chase, told Bloomberg.

“I fail to see the economic emergency which will motivate the SNB (Swiss National Bank) to continue to offset that pressure with very substantial foreign-exchange purchases.”

The organization for Economic Cooperation and Development predicts the Swiss economy will shrink 1.9 percent this year, less than half the 4 percent forecast for the euro zone.

Swiss banks say rising interest rates will lead the SNB to curtail its sales of the franc.

Yale finance professor Jeffrey Garten sees the dollar dropping more than just against the franc. Thanks to the U.S. debt burden and Asian economic strength, he wrote in the Financial Times, “a permanently and greatly weakened dollar” is coming.

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The Swiss franc is taking over the dollar’s role as the world’s safe-haven currency.Already the buck has dropped to a 19-month low of 1 franc, thanks to Switzerland’s relative economic strength and its current account surplus.Swiss franc futures and options contracts on the...
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Tuesday, 01 Dec 2009 08:22 AM
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