Swiss Franc, Yen Gain as Slowdown Concerns Maintain Safety Bid

Swiss Franc, Yen Gain Amid Slowdown Concerns
An employee handles fifty euro notes Swiss franc coins on the counter of a currency exchange in this arranged photograph in Effretikon, near Zurich, Switzerland. Photographer: Gianluca Colla/Bloomberg

The Swiss franc and the yen strengthened against the euro and the dollar as concern the global economic recovery is faltering maintained demand for assets perceived as the safest.

The euro weakened versus most of its 16 major peers as economists forecast unemployment in the 17-nation euro-region remained unchanged at 9.9 percent last month, a level it hasn’t fallen below since 2009. The yen headed for a third monthly gain versus the dollar before a report forecast to show the U.S. employers added fewer jobs this month. New Zealand’s dollar headed for its biggest monthly decline in a year versus the yen as the country’s business confidence worsened.

“Investors that think the world is falling apart and are worried about capital preservation still view the yen and the franc as safe havens,” said Elsa Lignos, a currency strategist in London at RBC Capital Markets in London. “We like the yen -- it just seems a little less overstretched than the Swissie.”

The franc gained 0.5 percent to 1.1783 per euro at 8:26 a.m. in London, snapping three days of declines. Switzerland’s currency advanced 0.4 percent to 81.68 centimes per dollar. The yen strengthened 0.3 percent to 110.51 to the euro, and gained 0.2 percent to 76.63 per dollar.

The euro was little changed at $1.4423 from $1.4441 yesterday, giving it a 0.2 percent advance this month.

Slowdown Concern

Concern the global economy is slowing was reinforced by minutes of the Federal Reserve’s Aug. 9 meeting released yesterday, showing policy makers favored “more substantial” measures to boost the U.S. economy than the current pledge to hold rates at a record low for the next two years.

European Central Bank President Jean-Claude Trichet said Aug. 29 the bank is reviewing its assessment of inflation risks as economic growth in the region slows. The comments prompted bets the central bank will cease raising its benchmark interest rate, following two increases this year to 1.5 percent.

The euro area’s unemployment rate in July held at 9.9 percent for a fifth month, according to the median estimate of economists surveyed by Bloomberg before the report today. Initial estimates for the region’s inflation rate this month remained at 2.5 percent from July, a separate survey indicates before the data also today.

A Credit Suisse Group AG index showed traders are betting the ECB will cut its benchmark rate by 15 basis points, or 0.15 percentage point, in the next 12 months. That compares with a 25-basis-point increase projected on Aug. 1.

RBC Capital Markets expects the euro to weaken to $1.33 over the next 12 months, Lignos said.

U.S. Jobs

Demand for the yen and Swiss franc was bolstered before a report today forecast to show the U.S. added fewer jobs this month, adding to signs the world’s biggest economy is slowing.

Companies in the U.S. added 100,000 positions in August, compared with 114,000 in July, a Bloomberg survey shows before data from ADP Employer Services.

“Macroeconomic indicators are faring badly worldwide,” said Keiji Matsumoto, a currency strategist in Tokyo at SMBC Nikko Securities Inc., a unit of Japan’s second-biggest listed bank. “The Swiss franc and yen will continue to benefit from such a situation” as havens, he said.

U.S. Treasury Secretary Timothy F. Geithner and newly elected Japanese Prime Minister Yoshihiko Noda discussed their commitment to addressing global economic challenges and support for strong, sustainable and balanced global growth, Geithner’s office said in an e-mailed statement. The two didn’t discuss currencies, Noda told reporters in Tokyo today.

‘Rapidly Deteriorating’

“When the U.S. economy is rapidly deteriorating, people will expect additional monetary easing, which leads to the dollar’s depreciation,” said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd., which provides foreign-exchange margin-trading services. “If the Fed adds to monetary easing, it will boost the yen.”

The yen has gained 6.3 percent in the past three months against a basket of its nine major peers, according to Bloomberg Correlation-Weighted Currency indexes. The franc, the second-best performer, has advanced 4.2 percent.

New Zealand’s dollar headed for its biggest monthly loss versus the yen in a year after a survey by ANZ National Bank Ltd. showed business confidence declined in August.

A net 34.4 percent of companies surveyed in New Zealand expect the economy will improve over the next 12 months, down from 47.6 percent in July, according to the ANZ survey released today. The net figure subtracts the number of pessimists from the number of optimists.

New Zealand’s dollar traded at 65.44 yen from 65.46 yesterday and has lost 3.1 percent this month. It was at 85.37 U.S. cents from 85.31 cents, set for a 2.9 percent slide since the end of July.

Download: CIBCs Stretch Says Euro-Dollar is Range Bound

Download:

Before it's here, it's on the Bloomberg Terminal. LEARN MORE