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At least one Brexit warning light is still flashing red.
While the pound has rallied in recent days and bookmakers have shortened their odds on a win for “Remain” in Thursday’s U.K.’s European Union referendum, the Swiss franc is still about 0.4 percent from the 2016 high it reached last week.
The Swiss currency, traditionally sought by investors in times of market stress, climbed as the “Leave” campaign gained ground in polls last week, but, unlike other assets, hasn’t rebounded as the pro-EU camp appeared to recapture the momentum. The franc is a good barometer of Brexit risk, David Bloom, head of global currency strategy at HSBC Holdings Plc, Britain’s largest bank, said last month.
“The Swiss franc is entirely a function of referendum risks right now,” said Ned Rumpeltin, European head of currency strategy at Toronto Dominion Bank in London. “Euro-franc has been hovering toward low levels. That may suggest that the market is looking to use it as a lower-cost or lower-volatility hedge at this stage against a ‘Leave’ outcome.”
The Swiss franc was little changed at 1.0825 per euro at 12:15 p.m. in London. It touched 1.0777 on June 16, after a series of polls showed a lead for those wanting to leave the world’s biggest trading bloc.
The resilience is in contrast to other haven assets, with German and U.K. bonds yields having risen from record lows reached last week. The pound, meanwhile, has climbed to $1.4685, about 4.8 percent higher than last week’s low of $1.4013.
An index of betting flows compiled by Oddschecker shows the chance of a Brexit has fallen to 25 percent from 43 percent on June 14. Polls, meanwhile, say the race is too close to call after a swing toward the “Leave” campaign came to an apparent halt last week following the murder of Labour Party lawmaker Jo Cox, a supporter of staying in the EU.
By Marianna Duarte De Aragao (Bloomberg)