Wednesday November 10, 2004 - 11:21:43 GMT
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INVESTICA Ltd - www.investica.co.uk
Limited Swiss retreat likely
Lower oil prices and equity-market gains will tend to erode Swiss franc support on economic grounds, but the political risk premium is likely to remain relatively high. Overall, the Swiss franc still offers little value below 1.18 level against the US currency even though the dollar will struggle to make significant gains. The franc should also hit tough resistance beyond the 1.5250 level against the Euro.
The US currency strengthened to 1.1850 against the Swiss franc during Tuesday, but it was unable to hold these gains and weakened back to 1.1810 in early Europe on Wednesday. The franc remained firm against the Euro at 1.5260 and subsequently extended gains to 1.5245.
The decline in oil prices and market interest in global equities should lessen short-term support for the Swiss currency. There will also be speculation that the Swiss National Bank will protest against currency strength and this should offer some US currency support below the 1.18 level.
The Iraq situation will also remain important as the US-led attacks on Falluja continue and the security concerns will offer some franc support. The political risk premium should remain relatively high which will offer some further franc support.
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