EUR/CHF
Swiss Currency Declines To Multi-Week Low Against Euro [EUR/CHF]
Monday, April 07, 2008 4:05:11 AM - In early trading on Monday, the Swiss currency dropped to a 38-day low against the Euro despite a fall in which country`s unemployment rate. The franc also showed weakness against its US and UK counterparts and reached 4-day and 3-day lows, respectively.
The State Secretariat for Economic Affairs, or SECO, reported today that Switzerland`s jobless rate dropped to 2.6% in March from 2.7% registered in February. The unemployment rate came in line with analysts` expectations. The number of unemployed people decreased 12% or 14,138 year-on-year to 103,777 in March.
The Swiss franc lost ground against the euro in early deals on Monday. The franc, which closed Friday`s trading at 1.5830 against the euro, fell to a 38-day low of 1.5906 by about 3:25 am ET. The next downside target level for the franc is seen around 1.622 against the euro.
The franc reversed its direction against the euro after hitting a new multi-year high of 1.5322 on March 17. Since then, the franc has lost around 4%.
Both the Euro-zone and Switzerland`s annual inflation soared in March due to higher energy prices, according to reports released last week.
Euro-zone annual inflation accelerated to a new record high of 3.5% in March, up from 3.3% in February. Economists were looking for a preliminary estimate of 3.3% for March.
Swiss annual inflation increased to 2.6% in March from 2.4% in February, while analysts had expected an inflation rate of 2.5%. A year ago, annual inflation stood at 0.2%. The CPI for March rose 0.3% month-on-month, faster than the expected increase of 0.2% and 0.1% registered in February.
Euro-zone annual inflation continues to stay above the European Central Bank`s target, which is to keep inflation rates “below, but close to, 2% over the medium term”. An accelerating inflation rate is preventing the central bank from lowering borrowing costs in the 15-nation economy. But slowing growth has prompted calls from some politicians and businessmen for the ECB to cut rates soon.
Meanwhile, the Swiss National Bank Governing Board Member Thomas Jordan said in a speech in Bern that there is still uncertainty about the volume of additional bank writedowns that will be needed. Further, he said the situation on the international money market remains tense. According to Jordan, the banks themselves must make a substantial contribution to solving the problems that triggered the ongoing crisis.
Further, Jordan stated that the Swiss National Bank was able to stabilise the three-month Libor within the target range. In addition, it maintained fluctuations in the relative restrictiveness of monetary policy low by comparison with other countries.
Against the dollar, the franc slipped to a 4-day low of 1.0175 in today`s early deals. If the franc drops further, it may test support around the 1.022 level.
Disappointing US jobs data pushed the dollar to a 3-day low of 1.0018 against the franc on Friday morning. But the US currency recovered in afternoon trading and closed the day`s deals at 1.0062.
Employment fell by more than expected in the month of March, according to a report released by the Department of Labor on Friday, with a steep drop in employment in the goods-producing sector contributing to the decline. The report showed that non-farm payroll employment fell by 80,000 jobs in March following a revised decrease of 76,000 jobs in February. The drop in jobs marked the biggest decrease since March of 2003. Economists had been expecting a decrease of 50,000 jobs compared to the drop of 63,000 originally reported for the previous month.
The report also showed that the unemployment rate jumped to 5.1 percent in March from 4.8 percent in February. The increase exceeded the estimates of economists, who had expected to the unemployment rate to edge up to 5.0 percent.
The Swiss franc also weakened against the pound in early deals on Monday. The franc touched a 3-day low of 2.0189 per pound at 3:20 am ET, compared to 2.0054 hit late Friday in New York. The immediate support for the Swiss currency is seen around the 2.023 level.
Tags: EUR/CHF
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