FOREX-Euro fall deepens against Swiss franc

* Euro hits all time low vs Swiss franc

* Euro pinned near three-week lows on dollar

* Rising stocks, commodities keep Aussie well-bid

(Recasts, changes dateline, adds quote, previous TOKYO)

By Anirban Nag

LONDON, Dec 22 (BestGrowthStock) – The euro hit all-time lows
against the Swiss franc on Wednesday, with investors
increasingly nervous about the single currency’s prospects given
the euro zone’s peripheral debt problems.

Latest blows to the euro zone’s struggling, heavily-indebted
economies came from Moody’s, which warned it might cut
Portugal’s rating, and Fitch, which said the same about Greece.
[ID:nTOPNEWS]

“The rating agencies are not saying anything new but the
question is how does this market want to take it,” said Geoffrey
Yu, currency strategist at UBS. “Clearly these are terrible
market conditions and the speed at which the euro is losing
ground against the Swiss franc is a bit disconcerting.”

Liquidity has dried up ahead of the Christmas holiday and
year-end and in thin conditions investors were selling the euro
to express a bearish view about the euro zone while preferring
the safe-haven status of the Swiss franc.

The euro (EURCHF=: ) was down 0.3 percent at 1.2511 Swiss
francs. It also fared badly against the high-yielding Australian
dollar, (EURAUD=R: ), falling to a low just under A$1.3100.

Traders said there were barriers around 1.2500 francs in the
euro/Swiss franc cross. Other possible near-term targets include
1.2300, while in the longer term it could look to around 1.1760,
an Elliot wave equality target, though the franc’s low yield may
deter fund inflows.

The euro was up 0.36 percent against the dollar at $1.3142
(EUR=: ), climbing above its 200-day moving average of $1.3095 and
off a near three-week trough of $1.3073 set on Tuesday. Traders
said bids by Asian central banks was supporting the euro.

Still, not many were optimistic about the euro.

“In the current environment of very thin market liquidity,
the euro seems to be perceived as carrying too much risk into
the year-end, discouraging investors from establishing fresh
long positions,” said Valentin Marinov, currency strategist at
CitiFX.

Marinov expected the euro to underperform against riskier
currencies like the Australian dollar and the Scandinavian
currencies.

AUSSIE UNDERPINNED BY RISK TRADES

The Australian currency (AUD-D4: ) was underpinned by further
gains in equities and commodities, suggesting improving risk
appetite as analysts revise up forecasts for growth in 2011.

On Tuesday the S&P 500 (.SPX: ) finally recovered all the
ground lost since the Lehman debacle, while the CRB commodities
index (.CRB: ) reached a two-year peak.

“In the currency and European bond markets risk aversion is
prevailing. But in many other markets we’ve seen risk-taking,”
said Tohru Sasaki, chief strategist at JPMorgan Chase Bank.

“This may indicate that the world’s financial markets are
becoming bubbly, driven by excess liquidity. Asset prices could
rise further if European problems stabilise, which would
probably mean a rise in cross/yen as well as a fall in
dollar/yen.”

The dollar has fallen almost 10 yen since the end of 2009.
On Wednesday it was at 83.74 yen, sandwiched between bids under
83.50 and offers above 84.50.

In the near term dealers expect range-bound trade, with
one-month implied volatility on dollar/yen falling below 9.5
percent (JPY1MO=: ), the lowest since late 2007.

The dollar index (Read more about the global trade. ) (.DXY: ) (=USD: ) slipped 0.3 percent to 80.51,
which marks a gain of 3.4 percent for the year but still leaves
it more than 9 percent below the June peak of 88.708.

The United States and Britain are due to release their
latest estimates of gross domestic product (GDP) for the third
quarter. U.S. growth is seen likely to be revised up to an
annualised 2.8 percent, from 2.5 percent previously.
(Additional reporting by Hideyuki Sano in Tokyo; Editing by
Patrick Graham)

FOREX-Euro fall deepens against Swiss franc