Monday January 23, 2006 - 11:20:53 GMT
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INVESTICA Ltd - www.investica.co.uk
Risk aversion supports Swiss franc
The Swiss currency strengthened to 1.2760 against the dollar late in New York on Friday as oil prices rose and Wall Street came under downward pressure. The Swiss currency strengthened further to highs near 1.2630 in early Europe on Monday before correcting weaker while the Swiss currency was trading close to 1.55 against the Euro.
Economic risk aversion had eased before the Friday New York opening, but a rise in gold prices is a signal that underlying unease will persist and there should still be short-term franc demand, especially if equity prices continue to weaken. Any combination of rising political and economic risk aversion would be likely to trigger more substantial franc buying interest. The Iran situation will be watched closely in the short term given that it has important political and economic implications and any further increase in tensions would strengthen the franc.
The latest speculative IMM data recorded a small net long Swiss franc position. This will make it more difficult for the Swiss currency to make further headway unless there is a further increase in risk aversion.
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