Euro hits another low vs Swiss franc

By Julie Haviv

NEW YORK (BestGrowthStock) – The euro slid to its lowest level against the Swiss franc for a sixth straight day on Wednesday, with losses expected to steepen in 2011 as the euro zone debt crisis weighs.

The euro fell (Read more about the trembling euro. ) below 1.25 Swiss francs, down about 16 percent so far this year, as debt troubles in Portugal, Spain and Greece and fears of contagion enhanced the safe-haven status of the Swiss currency.

Uncertainty surrounding these countries has hurt the euro as investors seek safety. At the session low, the euro was below its 200-day moving average, reaching $1.3095, a bearish sign.

“If you look at what is going on with the euro it shows there is negative sentiment due to the lack of resolve in the euro zone,” said Jessica Hoversen, currency strategist at MF Global in Chicago. “I do not see the major downturn trend of the euro being threatened before end of year.”

In late New York trading, the euro was down 0.7 percent at 1.2469 Swiss francs. It hit as low as 1.2448 on trading platform EBS after taking out option barriers at 1.2500, traders said.

However, the euro gained against the dollar, rising 0.05 percent to $1.3100, which was below the session’s high of $1.3181 but bouncing off its near three-week trough of $1.3073 set on Tuesday.

Hoversen said the euro versus the Swiss franc will likely test the 1.20 level, but she sees that level as a bottom and it should climb above it next year.

The options market signaled further downside for the pair and speculative positioning data showed an increase in bets in favor of the Swiss franc. Morgan Stanley said this week it expects the euro to fall to 1.20 Swiss francs in 2011.

“We view the surging Swiss franc heading into year end as an ominous warning sign for further trouble ahead in the euro zone in early 2011,” said Lee Hardman, currency economist at the Bank of Tokyo-Mitsubishi UFJ in London.

“It appears that smart money investors are preemptively bailing funds out of the euro zone with Switzerland providing a safe port to ride out the euro zone sovereign debt storm that appears to loom on the horizon,” Hardman said.

The Jornal de Negocios daily newspaper reported China is looking to buy between 4 billion euros ($5.26 billion) and 5 billion euros of Portuguese sovereign debt to help the country ward off pressure in debt markets, though it gave no details of its sources. China’s central bank declined to comment on the report.


Euro/Swiss franc risk reversals moved further in favor of euro downside this week as the spot rate repeatedly hit all-time lows.

One-month 25-delta euro/Swiss risk reversals last traded at around 2.10, with a bias toward puts, suggesting more investors are betting the euro will fall against the Swiss franc than rise. In mid-December, one-month risk reversals were around $1.90.

The latest IMM data from the Commodity Futures Trading Commission showed speculators boosted long positions in the Swiss franc in the week ending December 14. The number likely increased further this week given the rally in the franc.

Goldman Sachs said its implied IMM EUR/CHF positioning score stands at -4.5, the same level as in August and consistent with a relatively stretched short positioning that has been exceeded only rarely in the past.

Against the yen, the euro fell (Read more about the trembling euro. ) 0.3 percent to 109.42.

The dollar lost 0.3 percent to 83.54 yen after data showed U.S. economic growth was a touch higher than previously estimated in the third quarter, but below expectations.

In the near term, dealers expect range-bound trade, with one-month implied volatility on dollar/yen falling below 9.5 percent, the lowest since late 2007.

Looking ahead, U.S. economic data will be at the forefront on Thursday, with the Labor Department’s weekly jobless claims report and the Commerce Department’s November new home sales data slated to in the morning.

If the data comes in better than expected, it would bode well for the dollar but weigh on the euro.

“Growth in the U.S. should keep the dollar firm for the time being, with the euro at risk of hitting $1.20 to $1.25 in the second half of next year before reaching a bottom,” Hoversen said.

(Additional reporting by Wanfeng Zhou in New York)

Euro hits another low vs Swiss franc