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Swiss franc approaches 8-month low on speculation SNB plans negative interest rates

Sterling hit a one-month high against the euro on Wednesday, coming close to its highest level since March after a German official dampened hopes that this week's EU summit would produce a comprehensive deal to tackle the euro zone crisis. The euro fell after a government official said Berlin was becoming more pessimistic about the chances of a significant agreement at the summit because some governments did not seem to have grasped the gravity of the situation. The focus on the euro zone this week meant sterling largely shrugged off weak UK industrial production data, with traders also citing demand for the UK currency at the fix — the time when banks set a reference rate for the currency. Against the dollar, the pound was up 0.6 percent at $1.5685. Technical analysts highlighted resistance at $1.5740, the 55-day moving average, ahead of the late November high at $1.5780.
Data 12.00: Asset Purchase Facility; Official Bank Rate.


The euro rose against the dollar, after erasing earlier losses, as optimism increased that European leaders will be able to agree on measures to help solve the region’s debt crisis. The 17-nation currency dropped earlier against most of its counterparts after a German government official said the nation rejects proposals to combine current and permanent euro-area rescue funds. The European Central Bank is forecast to announce an interest-rate cut today and European leaders gather for a summit in Brussels during the next two days. The European Union had its AAA long-term rating put on “credit watch negative” by Standard & Poor’s, which is also reviewing ratings for BNP Paribas SA, Commerzbank AG and Deutsche Bank AG. The ratings company put 15 euro countries on similar watch for downgrade earlier this week, saying it would conclude its review following the leaders’ summit. The euro rose 0.2 percent against the dollar to $1.3420 where it has held overnight.
Data 12.45: Minimum Bid Rate; 13.30: ECB Press Conference.


The U.S. dollar was lower against its major counterparts on Wednesday, as hopes for progress in tackling the debt crisis in the euro zone boosted demand for riskier assets. European leaders are due to discuss changes to EU treaties which would allow for greater fiscal integration and stricter enforcement of budgetary discipline in the single currency bloc. Meanwhile, investors were also eyeing the European Central Bank’s policy decision on Thursday, as the bank is likely to cut interest rates by 0.25% to 1%.  The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.13% to hit 78.53. The greenback was lower against the pound, with GBP/USD advancing to trade around the 1.5700 handle.
No major data due today.


•    The Swiss franc weakened to within one centime of an eight-month low against the dollar after a lawmaker said a government panel is considering using negative interest rates to combat the currency’s appreciation. The franc reversed an earlier 0.3 percent gain versus the greenback after Finance Minister Eveline Widmer-Schlumpf said negative interest rates and capital controls “are issues which are being examined” by a committee looking at ways to counter the currency’s strength. The statement added to speculation the Swiss National Bank will adjust the franc’s cap of 1.20 per euro at its policy meeting on Dec. 15. Unemployment held at an almost three-year low, data yesterday showed.


























red = down

blue = up (snap shot)


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