Swiss Franc Set to Reach Dollar Parity, Credit Suisse, UBS Say

Switzerland’s franc is weakening toward parity with the dollar, dragged down by a tumbling euro, analysts at Credit Suisse Group AG (CSGN) and Swissquote Bank SA (SQN) said.

The franc fell to its lowest level in 19 months at the end of last week, trading 1.3 percent from one-to-one with the greenback. It has dropped about 20 percent against the dollar since the Swiss National Bank imposed a cap on the currency’s appreciation in September to ease a strain on exporters. The SNB has vowed to defend its 1.20 per euro limit.

“If we think the SNB is intervening, then they are essentially recycling the euros into a series of other currencies, 50 percent of which are going to be dollars,” said Chris Walker, a currency strategist at UBS AG in London. “That’s going to push the dollar-franc higher.”

The franc weakened 0.2 percent to 98.24 centimes per dollar at 7:52 a.m. London time, after depreciating to 98.73 centimes on July 13, the weakest level since Dec. 9, 2010. Switzerland’s currency was at 1.20103 per euro, from 1.20090 last week.

The euro depreciated 0.2 percent to $1.2225, down 5.7 percent this year.

“If the euro weakens due to global risk aversion toward $1.20, we would expect dollar-franc to reach parity,” said Bernd Berg, a foreign-exchange strategist at Credit Suisse in Zurich.

The SNB imposed its limit after investors sent the franc almost to parity with the euro in August as they sought a haven from the deepening euro-area financial turmoil and ward off the risk of deflation.

Franc parity with the dollar won’t boost Swiss inflation, said Peter Rosenstreich, Geneva-based chief currency analyst at Swissquote.

“It’s not going to have the overarching effect that people expect it to have,” he said. “The Swiss economy is more related to the euro economy.”

The franc-dollar pair will reach parity “within the coming month,” Rosenstreich said.

To contact the reporter on this story: Roxana Zega in London at rzega@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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