Swiss Franc Nears Parity With Dollar, Rises Versus Euro as Economy Grows

The franc strengthened against the dollar, approaching parity with the U.S. currency for the first time in almost nine months, as the Swiss economy expanded at a faster pace than economists forecast in the second quarter.

Switzerland’s currency also appreciated against the euro. Gross domestic product rose 0.9 percent from the first quarter, when it increased 1 percent, the State Secretariat for Economic Affairs in Bern said today. The median of 18 estimates in a Bloomberg economist survey was for an 0.8 percent gain.

“The Swiss franc is firing on all cylinders,” said Peter Rosenstreich, chief market analyst in Geneva at ACM Advanced Currency Markets, which handles about $150 billion of foreign- exchange trades a month. “The underlying economics of Switzerland are very, very healthy. Concerns about deflation have subsided, and the Swiss National Bank is unlikely to get involved to weaken the franc. In the very near term we’re going to hit parity.”

The franc appreciated 0.4 percent to 1.0122 per dollar as of 4:49 p.m. in London. The currency reached 0.9988 on Dec. 4, the last day it traded past parity with the greenback. It also strengthened 0.3 percent against the euro to 1.2976, after reaching 1.2852 on Aug. 31, its strongest level since the single currency was introduced in 1999.

The franc strengthened against 11 of its 16 most-traded peers today, and has risen 5.2 percent this year against a basket of 10 developed-world currencies, according to Bloomberg Correlation-Weighted Currency Indexes. The franc has gained 13 percent against the euro this year and appreciated 2.2 percent against the dollar.

Franc is the New Mark

The franc will stay strong and investors should hold it as a proxy for the old German mark as the Swiss currency benefits from economic growth and its status as a haven, UBS AG said.

“Today’s Swiss second-quarter GDP data confirms how closely Switzerland is matching Germany’s economic performance,” Mansoor Mohi-Uddin, global head of currency strategy in Singapore, wrote in an e-mailed note today. “We expect the franc to remain strong throughout the decade.”

To contact the reporter on this story: Stephen Morris in London at smorris39@bloomberg.net.

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