ZURICH: The Swiss franc tracked the euro higher to hit its highest level in almost three weeks against the dollar on Monday, as a rescue deal for Spain's embattled banks, secured over the weekend, boosted appetite for risky assets.
The euro zone decided to lend its fourth-largest economy up to 100 billion euros ($125 billion) to reassure investors and prevent the threat of a bank run in case Greece's crisis heats up again after elections this coming weekend.
This saw the euro spike almost 1 percent, and the relief rally also lifted stock futures across Europe.
Yet economists at both SEB and Commerzbank cautioned that the upswing might not last for long, as the aid to Spain had demonstrated Madrid faced tightened circumstances, including rising borrowing costs.
"How long the positive sentiment lasts on the forex market depends primarily what happens with Spanish (bond) yields," analysts at Commerzbank said.
"Once again political decision-makers in the euro zone may discover that they were unable to convince the markets," the Commzerbank analysts also said.
The franc has largely been trading in tandem with the euro since the Swiss National Bank imposed a cap of 1.20 per euro on the safe-haven franc to forestall a recession and deflation.
The SNB holds its next policy review on Thursday. According to economists polled by Reuters it is expected to keep rates at near nil and maintain its cap on the franc.
According to the poll, the central bank stands every chance of successfully defending cap even if the euro zone were to implode, though a significant minority believe capital controls may be needed.
The policy announcement is due at 0730 GMT on Thursday.
The franc hit its strongest since May 23 in intra-day trade and was up 1 percent against the dollar compared to Friday's New York close, trading at 0.9497 francs per dollar by 0614 GMT.
The franc was flat against the euro at 1.2012 per euro.
Comments
Comments are closed for this article.