Franc Strengthens Against Major Counterparts on Greek Debt-Crisis Concern
Banque De France Governor Christian Noyer
Qilai Shen/Bloomberg
European Central Bank officials are scheduled to speak today after Christian Noyer, governor of the Banque De France, yesterday said an austerity program was the only solution for Greece.
European Central Bank officials are scheduled to speak today after Christian Noyer, governor of the Banque De France, yesterday said an austerity program was the only solution for Greece. Photographer: Qilai Shen/Bloomberg
May 20 (Bloomberg) -- Kathleen Brooks, research director at Forex.com, discusses the outlook for the euro and yen. She talks with Owen Thomas on Bloomberg Television's "Countdown." (Source: Bloomberg)
May 19 (Bloomberg) -- Martin Schulz, a senior economist at Fujitsu Research Institute in Tokyo, talks about the outlook for Japan's economy and currency. Japan’s economy shrank more than estimated in the first quarter after the March 11 earthquake and tsunami disrupted production and prompted consumers to cut back spending, sending the nation to its third recession in a decade. Schulz speaks with Mark Barton on Bloomberg Television's "Global Connection." (Source: Bloomberg)
May 23 (Bloomberg) -- Geoffrey Dennis, global emerging-markets strategist at Citigroup Inc., talks about the outlook for emerging-market equities this year, the U.S. dollar and inflation in Brazil and China. Dennis speaks with Lisa Murphy on Bloomberg Television's "Fast Forward." (Source: Bloomberg)
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The Swiss franc climbed against all of its 16 most-traded peers, reaching a record versus the euro, on concern Greece’s debt crisis threatens the region’s economic recovery as European leaders struggle to resolve it.
The pound advanced versus the dollar and euro after the U.K.’s gross domestic product rose in the first quarter. The franc climbed versus Europe’s shared currency for a fourth day, the longest winning streak in a month. European Central Bank Executive Board Member Juergen Stark said Greece, Ireland and Portugal need a “drastic change” in economic policy.
“We have various pieces of evidence of tension in the euro zone,” said Jens Nordvig, global head of G-10 currency strategy at Nomura Holdings Inc. in New York. “People are certainly searching for nations that are deemed safe. Swiss franc is clearly among them.”
The franc strengthened 0.9 percent to 1.2293 per euro at 5 p.m. in New York, after earlier reaching a record 1.2271, and it gained 0.9 percent to 87.26 centimes per dollar. The dollar was little changed at $1.4088 per euro, after earlier appreciating as much as 0.6 percent. It gained to $1.3970 on May 23, the strongest level since March 17. The greenback traded at 81.97 yen, compared with 81.95 yen yesterday.
Europe’s common currency pared losses against the dollar as stocks rallied. The Standard & Poor’s 500 Index rose as much as 0.7 percent after earlier falling 0.3 percent.
Disagreement on Greece
The euro fell against the franc as European officials disagreed over how to resolve the region’s debt crisis, which began in Greece.
“There are still so many questions out there about Greece; you have half the world who says it needs to restructure, the other half saying don’t do it,” said Greg Salvaggio, senior vice president of capital markets at the currency-trading firm Tempus Consulting Inc in Washington.
European Union Economic and Monetary Affairs Commissioner Olli Rehn told the French newspaper Les Echos in an interview Greek debt maturities could be extended on a voluntary basis.
Restructuring Greece’s debt “cannot, must not be the solution,” Stark, a former vice president of Germany’s Bundesbank, said in a speech in Berlin. Euro-area leaders should “please consider the consequences” of a debt restructuring, Stark said.
“There is increased nervousness surrounding this Greece scenario,” said Kathy Lien, director of currency research at the online currency trader GFT Forex in New York. “The EU and the IMF have an uphill battle to gain their own support for providing additional aid,” she said.
The EU and the International Monetary Fund provided a 110 billion-euro ($155 billion) rescue package for Greece.
Euro Weakens
The euro dropped 1.9 percent over the past month, according to Bloomberg Correlation-Weighted Currency Indexes, which track 10 developed-nation currencies. The franc climbed 3.1 percent, and the greenback gained 2 percent.
German consumer confidence index will fall for a third consecutive month in June, GfK AG said in a report today, with speculation that Greece may need to default clouding growth prospects.
The yen was little changed versus the euro at 115.45.
“The yen has been taken out of the equation in terms of the hedge on risk aversion, which has helped the franc,” said Nick Parsons, head of markets strategy in London at National Australia Bank Ltd., the country’s largest bank by assets. “The Swiss franc is the best alternative. If you look at relative growth, the Swiss economy is in far better shape than the Japanese.”
Swiss Interest Rate
The franc also strengthened as investors speculated the record exchange rate against the euro won’t prevent Switzerland’s central bank from raising interest rates as the economy expands. Jan-Egbert Sturm, head of the KOF Swiss Economic Institute, told state television the central bank may increase borrowing costs from near zero as soon as next month.
The Organization for Economic Cooperation and Development said in a report today the Swiss central bank should start raising borrowing costs this year to counter emerging inflationary pressures.
The pound climbed against all of its most-traded counterparts except the franc after GDP rose 0.5 percent in the first quarter and 1.8 percent from a year earlier, matching initial estimates.
Sterling appreciated 0.7 percent to 86.55 pence per euro and gained 0.6 percent to $1.6274. U.K. exports rose 3.7 percent in the first quarter and net trade added a record 1.7 percentage points to gross-domestic-product growth, the Office for National Statistics said today in London.
Swedish Krona
The Swedish currency gained versus the euro as the central bank said inflation will accelerate and unemployment fell more than predicted. Sweden’s krona snapped two days of losses against the euro as Stockholm-based Statistics Sweden said the non-seasonally adjusted jobless rate declined to 7.9 percent in April from 8.1 percent in March.
Sweden is “getting a stronger and stronger economy, the situation in the labor market is strengthening and we’re seeing that unit labor costs, which previously fell, are now beginning to rise,” Riksbank Deputy Governor Barbro Wickman-Parak said yesterday in an interview in Stockholm, underlining the bank’s commitment to further tightening this year.
The krona gained 0.2 percent to 8.9239 per euro.
To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net; John Detrixhe in New York at jdetrixhe1@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
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