Swiss Franc Weakens as U.S. Data Optimism Boosts Risk Appetite

The Swiss franc weakened against higher-yielding currencies as optimism the U.S. recovery is gaining strength damped demand for haven assets.

Switzerland’s currency depreciated against 9 of its 16 major peers tracked by Bloomberg, falling most against the New Zealand dollar and the Swedish krona. The franc climbed to the strongest level in six weeks against the euro yesterday after the Swiss National Bank held the currency’s trading cap at 1.20 per euro. Swiss growth will almost stagnate next year, the KOF Institute said today.

“Currencies such as the Aussie dollar and the kiwi are faring a bit better today and Asian stocks were a little higher, but there clearly hasn’t been a huge improvement in risk appetite,” said Jane Foley, a senior foreign-exchange strategist at Rabobank International in London. “Yesterday’s SNB decision clearly brought a knee-jerk reaction, but I don’t think the intent of SNB policy has altered much.”

The franc was 0.9 percent weaker at 71.48 centimes against the so-called kiwi at 4:37 p.m. London time and depreciated 0.4 percent to 7.3925 krona.

It was 0.2 percent stronger at 1.2212 per euro after reaching 1.2207, the strongest since Nov. 4.

The currency appreciated 0.4 percent to 93.65 centimes per dollar. It dropped to 95.48 centimes before the central bank’s announcement yesterday, the weakest since Feb. 17.

U.S. Data

U.S. initial jobless claims fell by 19,000 to 366,000 last week, the least since May 2008, the Labor Department said yesterday. Other reports showed manufacturing in the regions covered by the Federal Reserve Banks of New York and Philadelphia accelerated more than forecast in December.

Switzerland’s economic growth will almost grind to a halt next year as the franc’s appreciation and foundering global demand for the nation’s goods hurt exports, the KOF Economic Institute said.

Swiss gross domestic product will probably rise 0.2 percent next year and 1.9 percent in 2013 from September forecasts of 1.5 percent and 2.5 percent, respectively, the Zurich-based institute said today.

“Obviously there was some hope that the SNB would raise the floor, although I was not anticipating it despite the fact that deflationary pressures are increasing and growth is slowing,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “I don’t expect a sharp fall lower, with verbal rhetoric likely to continue to be forthcoming.”

The Swiss currency has weakened 2.3 percent in the past three months, paring its gain for the year to 1.4 percent, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies.

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