Swiss Franc Strengthens Against Euro as U.S., European Stock Markets Fall

The Swiss franc strengthened to a record versus the euro as falling stocks and concern the global economy may weaken stoked demand for the currency as a haven.

The franc appreciated as much as 1.5 percent to 1.2844 per euro. The Swiss currency gained against all but one of its 16 most-traded peers as the Wall Street Journal said stress tests understated some European banks’ holdings of sovereign debt. The MSCI World Index fell 0.9 percent, its first drop in five days, while German, U.S. and U.K. bonds rose.

“Equities are off, bonds have rallied, core yields in Germany and the U.S. have fallen -- that’s an environment in which the safe-haven currencies are going to climb,” said Ray Farris, head of foreign-exchange strategy at Credit Suisse Group AG in London.

The franc strengthened 1.3 percent against the euro to 1.2862 at 12:27 p.m. in New York, and was little changed at 1.0121 per dollar.

Data released on Sept. 3 showed U.S. companies added more jobs than predicted in August, prompting a rally in stocks and a a selloff in government debt. The franc fell 0.9 percent against the euro that day.

“After the excitement of the positive surprise on payrolls, probably markets are sobering up to the reality that not doing as badly as feared is not the same as doing well,” Farris said.

Stress Tests

Switzerland’s currency has appreciated 5.4 percent this year against a basket of 10 developed-world peers, according to Bloomberg Correlation-Weighted Currency Indexes.

The European Union tested 91 lenders in July, giving 84 passing grades. Some banks excluded certain countries’ debt from their totals, while others reduced amounts to account for short positions they held, according to the report on the Journal’s website yesterday, which cited the newspaper’s own analysis.

The Journal’s report “perhaps played into market sensitivities,” helping boost the franc, Chris Turner, head of foreign-exchange research at ING Groep NV in London, said by phone.

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

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