Friday October 21, 2005 - 10:06:14 GMT
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INVESTICA Ltd - www.investica.co.uk
Position adjustment hampers dollar
The underlying yield considerations will remain negative for the Swiss currency. Risk aversion levels are likely to rise, however, and the franc will also tend to benefit from a liquidation of short franc positions to buy high-yield and high-risk assets. In this context, lower energy prices could offer short-term franc support on position adjustment even though it would lessen longer-term backing. Overall, the franc should find initial support close to 1.2880 and could strengthen towards the 1.2730/50 band against the dollar on a short-term view, but gains through here will be tough.
The Swiss currency strengthened back through 1.55 against the Euro on Thursday to highs of 1.5450 and the Swiss currency also strengthened to near 1.28 against the dollar in late New York trade before a partial dollar rebound to 1.2850.
Risk aversion levels will remain important in the short term with the renewed decline on Wall Street likely to increase very short-term demand for the Swiss currency. This trend is liable to continue in the very short term with investors looking to reduce risk and moderate positions ahead of the weekend.
Lower oil prices would tend to reduce underlying demand for the franc as global growth fears would ease, although the initial move could be for further Swiss currency gains as there would be pressure for a liquidation of commodity trades funded through the Swiss currency.
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