Friday November 25, 2005 - 11:21:29 GMT
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INVESTICA Ltd - www.investica.co.uk
Data boost for Swiss franc
The Swiss currency was unable to sustain gains beyond 1.31 against the dollar on Thursday and weakened back towards 1.3200 in early Europe on Friday as the dollar secured renewed buying interest before moving to 1.3150. The franc gained to 1.5470 against the Euro from lows around 1.5515 and should retain a firmer tone in the short term.
Confidence in the Swiss currency will be supported by the stronger than expected KOF leading index which strengthened to 1.12 in November from an upwardly-revised 1.01 in October. The data will reinforce expectations that the National Bank will tighten monetary policy at successive quarterly meetings and could go for a 0.5% rate increase in December. Overall yields will, however, remain low in comparison with the US and this will lessen the potential for Swiss franc buying interest.
Global liquidity growth will slow as there is consistent central bank monetary tightening and this will lessen the threat of speculative Swiss franc selling as a funding currency.
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