The safe-haven Swiss franc rallied on Thursday as unrest in the Middle East and tensions between Israel and Iran escalated. The US dollar declined broadly on Thursday as Middle East tensions boosted the appeal of other safe-haven currencies, with technical factors seen working in favour of a stronger Swiss franc.
Popular unrest Bahrain, Libya and Yemen as well as concerns about Iranian warships transiting the Suez Canal have fostered uncertainty among international investors in recent days. The Swiss franc, traditionally sought as a safe-haven during times of geopolitical tension, will likely continue to strengthen against other currencies if events in the Middle East escalate.
"The Swiss franc is doing well as Middle East tensions are weighing on the market a bit," said Kathy Lien, director of research at GFT Forex in New York. The US dollar fell 0.8 percent to 0.9514 Swiss franc, while the euro dropped 0.6 percent to 1.2945 franc. "If events in the Middle East do escalate we will see safe haven flows which will help the Swiss franc," said Kenneth Broux, market economist at Lloyds.
The euro edged higher versus the dollar as solid demand at a Spanish debt auction offset broader euro zone banking and sovereign debt concerns. It last traded up 0.3 percent at $1.3608. "The Swiss franc is doing well as Middle East tensions are weighing on the market a bit," said Kathy Lien, director of research at GFT Forex in New York. The euro was down 0.7 percent against the Swiss franc at 1.2931 francs, while the dollar was down 0.9percent at 0.9504 francs.
Key technical support for the euro/Swiss franc was broken at 1.3005, the 21-day moving average and base of the Bollinger band. Technicians see 1.2815 as the next bear objective and 1.2896 as support. This is the 38.2 percent retracement of the rally from 1.2398 record lows to the 1.3205 high from last Friday. Strong support should emerge around this region, an analyst said.
The euro was last up 0.3 percent at $1.3602 dollars. The dollar fell against the yen for a second straight day and was last down 0.5 percent at 83.20 yen. Michael Woolfolk, managing director at BNY Mellon Global Markets in New York, noted that inflation is not strictly an overseas phenomenon.