FOREX News – Swiss franc rises on unrest higher oil hits dollar
The Swiss franc soared to a record high against the U.S. dollar on Thursday and the yen gained broadly as fears the uprising in Libya could spill over to other oil producers drove investors to seek safety.
The dollar tumbled after a surge in oil prices stoked worries about the impact on U.S. consumer spending, the engine that drives the U.S. economy. Expectations the Federal Reserve would lag other major central banks in raising interest rates also pressured the currency.
The Swiss franc may extend gains should turmoil in the Middle East and Africa spread. Further strength in the yen could be limited, however, with the Japanese economy vulnerable to high oil prices and the risk of currency intervention by Japanese officials to protect exports.
‘If this unrest continues, I believe the Swiss franc will probably be the main beneficiary,’ said Vassili Serebriakov, currency strategist at Wells Fargo in New York.
‘The dollar is struggling to live up to its ‘safe-haven’ credentials,’ he said. ‘There’s some concern about the impact of higher oil prices on the U.S. economy.’
The dollar fell to a record low of 0.9234 Swiss franc on trading platform EBS, with losses accelerating after automatic sell orders were triggered below the previous record low of 0.9301 set at the end of last year. The dollar last traded down 0.7 percent at 0.9259 franc.
The dollar has fallen nearly 4.8 percent against the franc in the last two weeks, its worst showing since June. Technical analysts said the U.S. currency’s break below 0.9309 franc, around major trendline support drawn from lows hit in 1995 and 2008, had opened the way to more losses.
One-month implied dollar/Swiss volatility continued to pick up, trading around 11.20 percent on Thursday, although this was still well below levels of around 15 percent seen at the start of the euro zone debt crisis in April 2010. The euro fell to 1.2706 Swiss francs, its lowest since Jan. 13, and last traded down 0.4 percent at 1.2778.
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