Swiss Franc Falls as Stock-Market Rebound


The Swiss franc fell for a second day against the euro as gains in global stocks prompted investors to purchase higher-yielding assets with loans funded from Switzerland.

The franc was the second-worst performer of the 16 major currencies monitored by Bloomberg as Swiss central bank President Jean-Pierre Roth said the coming months will be of ``great importance'' in determining the impact of financial market turbulence. Demand for so-called carry trades rose as global stocks rallied, with the MSCI World Index having its first weekly advance in a month.

Against the euro, the franc declined 0.5 percent to 1.6137 by 2:02 p.m. in Zurich, from 1.6053 yesterday. It has fallen more than 1 percent in the last two days, after trading at a 14-month high of 1.5827 on Jan. 23.

The Swiss currency may trade as low as 1.63 per euro in the next month, Andreew said. It fell to 1.0957 against the dollar, from 1.0879 yesterday.

Switzerland's central bank predicts growth will cool this year to around 2 percent, after the economy expanded an estimated 2.5 percent in 2007. That forecast may prove too optimistic should the U.S. economy weaken more, bank governing board member Thomas Jordan said Jan. 15.

Carry-trade investors convert Japanese yen and Swiss francs to currencies they can lend out for a higher return, earning the difference between the borrowing and lending rates. They take the risk currency moves will erase their profits.

At 2.75 percent, Switzerland's key interest rate is the lowest among industrialized economies behind Japan's.


TradingEconomics.com, Bloomberg
1/25/2008 10:07:08 AM