Friday August 19, 2005 - 10:12:25 GMT
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INVESTICA Ltd - www.investica.co.uk
Risk aversion vital for Swiss franc
Confidence in the US dollar will remain firm in the short term with further market buying interest. The franc will, however, gain some support from the greater speculation over a domestic tightening. Any sustained increase in risk aversion would also offer strong support to the Swiss franc. Overall, the dollar should retain a firm tone initially, but is likely to hit near-term resistance close to 1.2750 against the franc.
The dollar pushed to a high of 1.2715 against the Swiss franc during Thursday as the dollar strengthened generally and the franc was unable to hold gains against the Euro. The US currency remained generally strong in early Europe on Friday with a move to 1.2765 before a retreat to 1.2735.
The Swiss currency secured some brief advantage from strong retail sales data with a 3.2% June increase and there will be some further speculation over a monetary tightening in September. The franc will still struggle to secure strong buying interest on domestic grounds given the yield disadvantage.
Levels of risk aversion will need to be watched closely in the short term with some evidence that investors are becoming more risk averse due in part to fears over the impact of high oil prices. If there is a sustained increase in risk aversion, the Swiss currency will be in a position to strengthen, possibly sharply.
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