Swiss Franc Rises


The Swiss franc rose after financial stocks in Europe slumped, prompting speculation credit-market losses are spreading and will cause central banks to cut interest rates.

The franc gained versus 13 of the 16 most-active currencies tracked by Bloomberg as declines in European banking stocks stoked demand for the safest assets. The Swiss currency has benefited as traders bet the Federal Reserve will follow yesterday's 75 basis-point reduction with more cuts, while the Swiss National Bank keeps its main rate unchanged.

Against the dollar, the franc gained as much as 1.5 percent to 0.9871 franc and was at 0.9980 by 2:32 p.m. in Zurich. It rose 0.1 percent to 1.5658 per euro. The franc may strengthen to 0.95 versus the dollar in the second quarter, according to Redeker.

The Dow Jones Stoxx 50, a benchmark for the euro region, fell as much as 1.5 percent. Losses were led by Societe Generale SA, which dropped as much as 8.2 percent, while HBOS Plc, the U.K.'s largest mortgage lender, slumped 8 percent. The U.K.'s FTSE 100 Index fell 0.6 percent.

The U.S. economy is facing the worst financial crisis in almost 80 years and interest-rate cuts will do little to cure the problem, Joseph Stiglitz, a Nobel-prize winning economist, said. More people are ``going to walk away from their mortgages,'' Stiglitz, a professor at Columbia University, told Radio New Zealand today from Auckland.

The franc also rose amid speculation the banking crisis was spreading to European lenders after HBOS denied it had liquidity problems, with spokesman Shane O'Riordain saying it ``ready access'' to funding. Societe Generale fell after BNP Paribas SA said it's no longer considering a ``potential tie-up.'

Swiss government bonds rose, with the yield on the 3 percent note due January 2018 falling 2 basis points to 2.8 percent. Yields move inversely to bond prices.


TradingEconomics.com, Bloomberg
3/19/2008 3:44:20 PM