Wednesday December 29, 2004 - 11:16:33 GMT
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INVESTICA Ltd - www.investica.co.uk
Swiss index causes concern
The interest rate trends will tend to weaken the franc slightly, especially after the disappointing KOF index figure today, but there is likely to be franc support close to the 1.55 level against the Euro and overall selling pressure should ease slightly. The dollar will remain vulnerable to speculative selling pressure, but there is little immediate value in short dollar positions below the 1.1300 level against the dollar.
The Swiss franc remained slightly firmer against the Euro with a move to 1.5430 in early Europe on Wednesday. The US currency was unable to sustain a move back above 1.1350 against the franc and dipped to 1.1330 in early Europe on Wednesday.
The Swiss KOF index was weaker than expected with a decline to 0.49 in December from a downwardly-revised 0.58 in November. This will increase fears that momentum in the Swiss economic recovery is fading. The weak figure will dampen expectations of an interest rate increase in March and will increase the risk of National Bank protests against franc strength. Rate differentials will remain against the Swiss currency in the short term. There is still the risk of the franc being used as a funding currency over the next few weeks.
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