Swiss Franc Rises to Record


The Swiss franc rose to a record against the dollar after a Carlyle Group fund moved closer to collapse, reviving concern that credit losses are widening and spurring demand for the safest assets.

The franc climbed versus 12 of the 16 most-traded currencies as stocks around the world dropped after Carlyle Capital Corp. failed to reach an accord with lenders, who demanded more than $400 million to meet margin calls. The franc held gains after the Swiss central bank today kept its main lending rate at a six-year high of 2.75 percent, as forecast by all 26 economists surveyed by Bloomberg News.

Against the dollar, the franc gained as much as 1 percent to a record 1.0045, and was at 1.0105 by 2:08 p.m. in Zurich, from 1.0147 yesterday. It also rose to 1.5732 per euro from 1.5778. The franc may climb to parity with the U.S. currency within the next month, Klawitter said.

Equity markets in Europe and Asia dropped, with the MSCI World Index retreating 0.6 percent in London. U.S. stock-index futures also fell.

Switzerland's currency is often sought by investors in times of international economic and political tension because of the stability of its government and economy. It gained almost 3 percent versus the dollar after terrorists destroyed the World Trade Center in New York on Sept. 11, 2001.

The franc gained as much as 2.1 percent versus South Africa's rand, a favorite of so-called carry trades. In these transactions investors borrow in low interest-rate countries to buy high-yielding assets elsewhere, earning the difference between the two rates. They take the risk currency moves will erase their profits.

Policy makers at the Zurich-based Swiss National Bank, led by Jean-Pierre Roth, left the three-month Libor target on hold. It was the second consecutive meeting at which the bank kept borrowing costs unchanged after raising them every quarter for two years.

Switzerland's rate is the lowest among major industrialized economies after Japan's 0.5 percent lending rate. The benchmark rate in South Africa is at 11 percent.

Swiss government bonds rose for a fifth day, with the yield on the 3 percent note due January 2018 falling 2 basis points to 2.89 percent. Yields move inversely to bond prices.


TradingEconomics.com, Bloomberg
3/13/2008 7:13:32 AM