Markets

Dollar rises as risk appetite falls, Swiss franc down

NEW YORK : The US dollar and yen firmed on Thursday, as anxiety about global growth and European banks drove investors t
Published August 18, 2011

 NEW YORK: The US dollar and yen firmed on Thursday, as anxiety about global growth and European banks drove investors to the relative safety of the two currencies.

It was a different story though for the other safe-haven, the Swiss franc, which fell as traders cited talk the Swiss National Bank intervened in the forwards market as part of its efforts to curb the surging currency.

"We have much lower risk appetite today and that's why we're seeing the dollar strengthen," said Ray Attrill, senior currency strategist, at BNP Paribas in New York.

"Stocks are down across the board and that may be due to some global growth worries. We also have an article from the Wall Street Journal saying the Fed is scrutinizing European banks in the US, which has weighed on risk sentiment."

The report said the $2.5 trillion US money market funds industry, which supplies short-term dollar funding to banks, has retreated from the euro zone in recent months.

The ICE Futures dollar index was up 0.5 percent at 74.024 while the euro fell 0.4 percent to $1.43765, tracking a more than 3.0 percent fall in European shares.

Technical support around $1.43600, the euro's 100-day moving average, and bids seen at $1.43500 were expected to limit further big losses, while steady sovereign demand at lower levels has been a pillar of support for the single currency.

However, a lack of more radical measures from Tuesday's Franco-German summit to address the euro zone debt crisis and lingering worries about some large European banks are likely to keep the euro under downward pressure.

The euro briefly trimmed losses against the dollar after US data showing hotter-than-expected consumer prices at 0.5 percent in July and a rise in the weekly jobless claims by 9,000 in the latest week. Both reports were perceived as somewhat risk-friendly.

"Core CPI was better behaved, and in any event, inflation is not the pressing issue these days," said Avery Shenfeld, chief economist, at CIBC World Markets in Toronto.

"Initial claims were a bit higher than expected...indicating a generally sluggish trend for hiring although still better than where we stood during Q2," he added.

The dollar gained 0.5 percent against the Swiss franc to 0.79430 francs, while the euro was slightly lower at 1.13930 francs, having earlier climbed to 1.15150.

"They (the SNB) have been in the FX swap market," said Chris Walker, currency strategist at UBS. "But we think the euro/Swiss franc will still fall back towards parity."

The SNB on Thursday declined to comment on the latest talk that it was intervening in the forwards market.

The franc had soared to record highs against the dollar and the euro earlier this month in a rush towards perceived safe havens sparked by euro zone sovereign debt worries and concerns about a global slowdown.

In a fresh attempt to tame the franc's runaway rise, the SNB said on Wednesday it would boost liquidity by expanding sight deposits to 200 billion francs from 120 billion, and said it would take additional steps if needed.

The dollar was flat against the yen at 76.590 yen, not far from its record low of 76.25 yen struck in March.

Traders said the greenback could test this record low next week, when most Japanese players return from holidays and as Japanese exporters may sell the dollar in end-of-the-month transactions.

 

Copyright Reuters, 2011

 

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