Swiss Franc Jumps, Surpassing Last Week's Record High Against the Euro

The Swiss franc rose to a record versus the euro as investors sought safer assets and a gauge of local consumption reached a two-year high, easing concern that central bankers will try to stem the currency’s gains.

Switzerland’s currency reached the strongest level since Jan. 11 against the dollar as stocks fell around the world. UBS AG’s index of consumption, which aims to predict developments about three months ahead, climbed to 1.86 in July from a revised 1.80 in June, the Zurich-based bank said today. That’s the highest since June 2008.

“To the extent that data have been good recently, and therefore diminishing the risk of deflation, the central bank will be comfortable to let the currency appreciate as long as it’s not too rapid,” said Adam Cole, head of global foreign- exchange strategy at Royal Bank of Canada in London. Demand for safer currencies “is as usual, spilling over to the franc,” Cole said.

The franc strengthened 0.7 percent to 1.2907 per euro as of 5:22 p.m. in London, after reaching 1.2879, its strongest level since the single currency was introduced in 1999. The franc gained 1.2 percent to 1.0141 against the dollar after strengthening to 1.0137. The MSCI World Index of stocks lost 0.2 percent.

The Swiss National Bank is following the franc “very closely,” Vice Chairman Thomas Jordan told SonntagsZeitung newspaper in an interview published on Aug. 29. The SNB, which began selling francs in March 2009 to curb gains and safeguard the economy, said at its monetary policy assessment in June that the risk of deflation had “largely disappeared.”

The currency gained against all of its 16 most-actively traded peers today. The franc has gained almost 15 percent against the euro this year as investors sought a haven from the euro-region’s debt crisis.

Swiss gross domestic product probably accelerated to an annual 2.6 percent rate in the second quarter, according to the median prediction of seven economists polled by Bloomberg before figures are released on Sept. 2.

To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net

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