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The Swiss franc climbed on Wednesday as global stocks fell and demand for haven assets increased on growing concerns that the U.S. presidential race had tightened.
The franc reached its strongest level versus the euro since June and advanced against the dollar. Demand for havens is being stoked after an ABC poll showing Republican candidate Donald Trump narrowly ahead in the U.S. presidential race a week before the election.
“When people think negatively about equity markets for whatever reason, that reflects back into those currencies like the Swiss franc,” said Hans Redeker, Morgan Stanley’s chief global currency strategist in London. “There is a debate about how Trump is going to affect asset markets versus Clinton. People in the U.S. are now more concerned Trump will win.”
The franc appreciated 0.1 percent to 1.07746 per euro as of 9:27 a.m. in London, and earlier reached 1.07542, its strongest level since June 27. It ended Tuesday with its strongest close since 2015.
During the second half of this year, when the franc strengthened beyond 1.08 per euro, the currency has snapped back, boosting speculation the Swiss National Bank was defending an unofficial limit. The central bank previously capped the currency at 1.20 per euro before abandoning the defense in January 2015.
Switzerland’s central bank may tolerate a stronger currency, Credit Suisse Group AG economist Maxime Botteron said in a note on Tuesday. Domestic factors such as stronger growth and slightly higher inflation, as well as international developments, may challenge the central bank’s current monetary policy, the economist said.
“What we’ve seen unofficially, through central bank actions, is a desire to keep it close to 1.08 per euro,” said Redeker. “Because the central bank has not made that official, that means there is not going to be an official defense of that.”
SNB President Thomas Jordan said on Tuesday the franc is “significantly overvalued,” speaking in Vevey, Switzerland. He said last month that he’d cut the central bank’s minus 0.75 percent deposit rate further if necessary to keep the franc in check.
By Charlotte Ryan (Bloomberg)