Wednesday May 3, 2006 - 10:12:02 GMT
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INVESTICA Ltd - www.investica.co.uk
Swiss correction needed
The franc retained a firm stance against the Euro on Tuesday and strengthened to 1.5580 in early Europe on Wednesday, although there was resistance close to this level. The US dollar found support close to 1.2325 against the Swiss currency on Tuesday with a fragile recovery back above 1.2370 in New York. The dollar was unable to sustain the gains and weakened back to below 1.2300 in early Europe on Wednesday before recovering back to 1.2370. Pressures for a franc correction weaker will be important in the short term.
Confidence in the domestic economy will offer support to the Swiss currency, but the impact will be offset by the prospect of a tough stance on interest rates by the ECB. The Australian rate increase will also maintain speculation over rising global rates which will limit franc buying interest on yield grounds alone.
The underlying Iran tensions are likely to discourage aggressive Swiss currency selling, especially as it will be difficult to secure a sustained reduction in tensions.
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