Swiss Franc Slides Further as Euro Extends Rally Into Fourth Day

  • Morgan Stanley sees potential for CHF to fall toward 1.20/EUR
  • Sweden’s krona gains as economy grows more than expected

Swiss Franc Continues to Weaken as Selloff Deepens

The Swiss franc was the biggest loser among its Group-of-10 peers, extending a selloff to reach the weakest level versus the euro since the Swiss National Bank abandoned its currency cap more than two years ago.

The franc dropped for a fourth day against the euro, with traders flagging sell orders being triggered above 1.12. Talks of initial placement offerings, or IPO, related flows have also supported the move. “There is potential to get to 1.20 in the coming quarters,” strategists at Morgan Stanley including Hans Redeker, wrote in a note to clients. “The CHF is the most overvalued G-10 currency,” they added.

Investors have been selling the Swiss franc against euro on the back of the monetary policy divergence between the respective central banks. While the European Central Bank is moving toward a tightening of policy, the SNB is sticking to its dovish stance. The euro has gained more than 11 percent this year against the dollar, the second-best performance among G-10 currencies.

Sweden’s krona gained the most versus the dollar Friday, extending its advance among major currencies this year, after data showed the Swedish economy grew more than expected in the second quarter, expanding 1.7 percent versus analysts’ forecast of 0.9 percent growth. Retail sales in June also beat analyst expectations.

  • EUR/CHF climbs 1% to 1.13778, after touching 1.13798, highest level since Jan. 15, 2015
  • EUR/SEK falls the most in two weeks, eyeing next support at 9.5089, July 18 low
    • SEB Chief Economist Robert Bergqvist on Twitter says Sweden’s preliminary 2Q GDP numbers are “very strong,” adding that the figures give SEB support for its more hawkish Riksbank forecast
  • EUR/USD rises 0.3% to 1.1710, set for third straight weekly increase
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