The Swiss franc gained against the euro as the downgrade of Portugal’s credit rating by Moody’s Investors Service spurred demand for the currency as a safe haven.
Many traders were unprepared to the sudden surge of risk aversion after the last week. It looked like the problems of Europe would go to the background for some time as Greece has “bought” some time for dealing with the debt crisis by accepting required austerity. The downgrades of European countries’ rating by rating agencies turned everything upside down and market sentiment shifted from risk appetite to risk aversion. Safe currencies, including the franc, thrive in such environment.
Yet the Swiss currency may encounter problems in Switzerland itself. The nation’s government said that the currency was in a “phase of overvaluation” and that the central bank may intervene in case a “worsening of the situation” would threaten the nation’s economic growth. Some market analysts speculated that the central bank may even embark on a quantitative easing.
EUR/CHF dropped from 1.2126 from 1.2018 and traded at 1.2028 today as of 3:12 GMT. USD/CHF fell from 0.8405 to 0.8393 on the previous session and was little changed at 0.8390 today. CHF/JPY traded near 96.32.
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