admin On Tuesday after the United States added Switzerland to its watchlist of currency manipulators, the Swiss franc rose to its strongest against the euro since April 2017.
A currency strategist at BNY Mellon, Neil Mellor, expressed that the inclusion on the watchlist might discourage the Swiss National Bank from intervening to try and limit the franc’s strength. He added that the market’s natural inclination would be to buy the franc.
Due to Switzerland’s large current account surplus, the Swiss currency is considered a safe place by investors to put money when markets turn nervous which forces the SNB to regularly intervene to limit franc appreciation and protect its export-dependent economy.
According to another analysts Switzerland’s inclusion on the watchlist had long been expected, after the U.S. Treasury had earlier removed it and instead cited general safe-haven flows.
Ulrich Leuchtmann, a Commerzbank FX strategist stated that at the moment we are seeing weakness in the South African rand and some weakness in the Turkish lira, therefore moves in the FX market might be less optimistic on risk-on factors.
On Monday, throughout the day, franc had been firmer and then gained in European mid-morning trade, long after the U.S. watchlist’s publication late.
Leaving the Swiss currency at its strongest in almost three years, the euro had dropped more than 0.4% to 1.0763 francs.
Against the dollar also the franc rose, the dollar was last down 0.4% at 0.9669 francs, however that was some way off the franc’s 16-month high of 0.9647 on Dec. 31.
According to the U.S. Treasury Department, it had added Switzerland to a list of countries where it had continued concerns about currency practices – Italy, Germany, Japan, Ireland, Malaysia, South Korea, Singapore, and Vietnam. There have been some signs of a more hands-off approach by the bank in recent months, however. Franc sight deposits at local banks, a proxy for measuring SNB interventions, have fallen by around eight billion francs since the end of October.
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