CHF Analysis: Swiss Franc Drops on Latest Economic News

ForexNewsNow | Published on November 1, 2010 at 12:23 pm

Swiss flagNEW YORK (Forex News Now) – In global forex trading news today, the Swiss franc fell against all major currencies as more evidence regarding the slowing of the Swiss economy became known.

Today, the Swiss National Bank released the minutes for its September policy meeting and revealed that it is keeping interest rates steady due to a cooling economy.  Since the report, the SNB has stated that it believes the Swiss economy is experiencing a significant slowdown due to waning exports and a general cooling of the global economy.

Philipp Hildebrand, the chairman of the Swiss National Bank, said on October 30th that he was predicting increased downward pressure on the Swiss economy and Swiss franc. “Meanwhile, we can see that exports are no longer having a positive stimulus on growth.”

These comments follow previous statements from Hildebrand and fellow board members regarding the strength of the CHF and monetary policy. On the 28th, Hildebrand commented, “The main problem is the lack of confidence in Europe that has shown its effects via turbulence on the forex market that represents a difficult challenge for Switzerland. The longer monetary policy remains expansive, the bigger the risk of undesirable developments (on the real estate market).”

Much of Switzerland’s economic strength rests on their exports, which have slowed over the past six months due to global economic conditions.  As a result, the Swiss franc – long viewed as a safe haven currency – has fallen since its apex earlier this year.

Currently in global forex trading today, CHF is down 1.39% against the dollar, to 0.9958, and 0.75% against the euro, to 1.3815.

The Swiss franc has also fallen against the pound, dropping 1.28% to 1.5956.

Another major influence in the Swiss franc today came with stronger-than-expected manufacturing data from China.  For the past six months, the Swiss franc has benefited from decreased risk appetite in investors who have strayed from investing in the dollar and other uncertain currencies.  With positive news coming out of China – and potentially from the U.S. with the ISM report due soon – investors have become more willing to take on risk, moving them away from CHF to other currencies.

To a certain extent, the attractiveness of CHF to global forex trading investors relies on the instability of other major currencies.  As they stabilize, this means that the Swiss franc could very well enter into a prolonged downward trend against its trading partners – especially as the SNB refrains from further monetary tightening in the near future.

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