Swiss franc edges up versus Euro as Greek anxiety rises

The Swiss franc ticked up against the euro on Monday due to mounting worries about Greece's debt mountain, in what could become the first real test of the Swiss National Bank's resolve not to let the franc appreciate past 1.20 per euro.

After the 'Swissie' gained some 20 percent against the common currency in the space of a few months, threatening to tip Switzerland into recession. With exports slumping and politicians warning of rising joblessness, on Sept. 6 the SNB announced it would set a ceiling on the franc.

There was little impetus for investors to test the SNB's resolve to defend its target last week as there was relatively little news about euro zone sovereign debts spooking investors last week.

But the euro dived to a seven-month low against the U.S. dollar and a 10-year trough versus the yen on Monday, on worries that the euro zone's support for Greece is wobbling and that the country may be forced to default on its debt.

Fears about a Greek default rose after senior politicians in German Chancellor Angela Merkel's centre-right coalition started talking openly about it.

The franc was trading slightly higher against the euro compared with the New York close, at 1.2058 per euro at 0907 GMT. It was marginally weaker against the dollar at 0.8883 per dollar.

"Increasingly tough talk from other European leaders towards Greece in the face of political tension from their own electorates has raised further fears that Greece will be unable, or unwilling to meet the requirements of the next bailout tranche, and thus lose funding, and ultimately default on its debt," Michael Hewson, market analyst at CMC Markets.

The SNB holds its quarterly monetary policy review on Sept. 15. According to a Reuters poll of analysts the SNB is expected to keep rates unchanged and to be able to defend its ceiling on the franc.


NITESH RANJAN
PGDM 3RD SEM