Thursday September 15, 2005 - 10:06:41 GMT
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INVESTICA Ltd - www.investica.co.uk
SNB decision today
The dollar retreated from levels above 1.26 in European trading on Wednesday, but the US currency pushed back above this level in Asian trading on Thursday and pushed to highs just above 1.2650. The Swiss currency was able to hold gains against the Euro and was close to 1.5445 in early Europe on Thursday.
The most likely outcome is that the National Bank will keep monetary policy unchanged at today's quarterly meeting with short-term interest rates remaining at 0.75%. The bank is, however, likely to warn over a possible tightening in December, especially with the rise in energy prices, which will offer some franc support. Any move to tighten policy today would offer immediate franc support, although this looks unlikely.
The level of demand for defensive currencies will remain very important in the short term. Levels of risk aversion appear to have eased slightly for now, but a renewed increase in oil prices and lower equity markets will tend to increase the risk premium slightly and this should limit selling pressure on the Swiss currency. Overall, the dollar offers little value at current levels.
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