Friday February 11, 2005 - 11:09:19 GMT
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INVESTICA Ltd - www.investica.co.uk
Korean fears support franc
The Korean situation will offer some safe-haven support to the Swiss currency, although a major reaction should be avoided in the short term. The interest rate trends will remain against the Swiss franc and firm equity markets will enhance any flows out of the Swiss currency. Overall, the US currency should be able to find good support close to the 1.2020 level against the franc in the short term, but the market reaction on Thursday suggests that there will be very tough dollar resistance above 1.2250. The Euro is likely to weaken slightly further against the franc towards 1.5520.
The US dollar pushed to a high of 1.2250 against the US currency before retreating sharply back to a low of 1.2040 and was around 1.2070 in New York with the dollar edging higher in early Europe on Friday. The franc also gained against the Euro to 1.5555.
Global security issues returned to attention on Thursday with North Korea admitting that it holds nuclear weapons and withdrawing from multilateral arms talks. This move will increase regional tensions and will offer some support to the Swiss franc on political safe-haven grounds.
Interest rate factors will remain an important market focus and the yield considerations will still tend to weaken the Swiss currency. Markets are not expecting a rate increase for March with opinion divided over the prospects for June. Still firm global equity markets will tend to erode near-term franc support.
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