The Swiss franc strengthened through 1.20 per euro for the first time as investors sought the safest European assets amid mounting concern that European officials will fail to contain Greece’s debt crisis.
The franc extended its run as the best-performing of 16 major currencies tracked by Bloomberg for the year to date, rising against all its peers apart from the yen today. The Swiss National Bank kept its benchmark interest rate at 0.25 percent today, as predicted by all 26 economists surveyed by Bloomberg News and SNB President Philipp Hildebrand said policy makers are “concerned” about exchange-rate developments. Greek Prime Minister George Papandreou said yesterday he would call a vote of confidence in Parliament.
“The political developments in Greece have triggered stress across financial markets,” said Ray Farris, chief strategist for Asia-Pacific fixed income and global head of foreign-exchange strategy at Credit Suisse Group AG in Singapore. “The SNB, given what’s happening with the currency, will probably go out of its way to be irrelevant. They’ll want to give the market nothing to add to the currency’s strength.”
The franc appreciated as much as 0.8 percent to a record 1.19956 against the euro, before trading 0.5 percent stronger at 1.20284 as of 9:07 a.m. in London. The currency was 0.4 percent stronger against the dollar at 84.99 centimes.
Stocks fell for a second day and the cost of insuring Asian debt rose to the highest in more than six months as investors sought safer assets amid signs the Greek debt crisis may be deepening. Moody’s Investors Service said this week it may downgrade French banks because of their investments in Greece. The developments may discourage Swiss investors from reinvesting earnings from abroad in the euro area, Farris said.
“It makes it very difficult for the Swiss to feel it’s attractive to recycle their surplus with investments in Europe,” he said. “There’s also some use of the franc as a hedge on euro-area risk.”