Buy Swiss Franc as a Euro Safe Haven, Says Bank of Tokyo Mitsubishi

The Swiss franc presents a safe- haven bet against the euro as the 16-nation currency looks set to weaken from levels reached since June, according to Bank of Tokyo Mitsubishi UFJ Ltd.

“There are now growing signs that the euro’s dead-cat bounce is coming to an end, providing an excellent opportunity to position for the next stage of euro weakness,” Lee Hardman, a London-based currency economist, wrote in a research note to investors today. The euro could depreciate given the relatively weak euro-zone economic outlook and persisting structural problems, he wrote.

Mitsubishi UFJ recommends selling the euro against the Swiss franc with a target of 1.2000 per euro, according to the note. The franc climbed 1.2 percent against the euro to 1.3243 per euro at 11:41 a.m. in New York. The Swiss currency has gained 7.4 percent against the euro since June 1, according to Bloomberg data.

A price above the 55-day moving average of 1.3800 per euro represents an “obvious stop,” Hardman wrote in the note. Stop orders are placed in advance to buy or sell an investment should it reach a certain price.

The Swiss franc “stands out as the haven currency of choice,” Hardman wrote, because “Swiss authorities have already unsuccessfully attempted to restrain Swiss franc appreciation against the euro, and appear unlikely to resume their efforts any time soon given their already uncomfortably elevated exposure to euros.”

The U.S. dollar and Japanese yen, two other safe-haven currencies, are losing appeal based on speculation their governments will apply additional monetary measures to stimulate economic growth, he wrote.

To contact the reporter on this story: Alex Kowalski in New York at akowalski13@bloomberg.net