Swiss Franc Gains Against Euro, Dollar After Bhutto Is Killed


The Swiss franc rose against the euro and the dollar after Pakistan opposition leader Benazir Bhutto was killed in a suicide-bomb attack, fueling demand for the safest assets.

The franc strengthened against 14 of the 16 most-traded currencies following the former prime minister's assassination at a political rally in Rawalpindi today. The franc also rose a second day against the dollar after data indicating slowing growth in the U.S. prompted investors to raise bets the Federal Reserve will keep cutting interest rates.

The assassination ``had an impact and we saw the franc appreciating,'' said Marcus Hettinger, a currency strategist in Zurich at Credit Suisse Group. ``Risk aversion is one of the factors that drive the franc,'' which may rise to 1.6 per euro by the end of the first quarter of 2008.

Against the euro, the franc advanced 0.2 percent to 1.6658 as of 6:23 p.m. in Zurich, its first gain since Dec. 20. It had its biggest gain in more than two months against the dollar, rising 1 percent to 1.1396 per dollar, taking its advance this year to 7 percent.

Carry-trade investors borrow at the low rates available in Japan and Switzerland and convert the proceeds into currencies they can lend out for a higher return. They earn the spread between the borrowing and lending rates, taking the chance currency moves will erase their profit.

Switzerland's main rate is 2.75 percent, the second-lowest after Japan's among the major economies.

The yield on the 4.25 percent Swiss government bond due June 2017 was little changed at 2.98 percent.


Bloomberg
12/27/2007 9:49:43 AM