Bloomberg News

Swiss Franc Weakens Versus Euro as Consumer Prices Stall in May

June 07, 2011

June 7 (Bloomberg) -- The Swiss franc weakened against all 16 major counterparts tracked by Bloomberg as data showed consumer prices were steady last month, damping speculation that the nation’s central bank will raise borrowing costs.

The franc weakened for the first time in three days versus the euro. Consumer-price inflation in May was unchanged from a month earlier, the Federal Statistics Office in Neuchatel said today. Prices rose 0.4 percent from a year earlier. Economists’ median estimate was for a monthly decline of 0.1 percent. The franc reached a record against the dollar before declining.

“The CPI data won’t spook the Swiss National Bank, which remains relatively dovish,” said Chris Walker, a foreign- exchange strategist at UBS AG in London. “The SNB doesn’t want to give any more incentive to buy the franc. They’re still worried about the level of the franc, which is mainly driven by external factors, such as risk appetite.”

The franc depreciated 1.1 percent to 1.22960 per euro as of 4:33 p.m. in London. It reached 1.20543, the strongest on record, on June 2. The Swiss currency dropped 0.4 percent to 83.84 centimes per dollar after reaching 83.27 earlier, the strongest since at least 1971.

The SNB’s rate announcement is scheduled for June 16. The central bank kept its three-month Libor target at 0.25 percent at its last meeting in March.

The Swiss currency has strengthened amid concern that the European sovereign-debt crisis will deteriorate, spurring investor demand for a haven.

The franc has climbed 5.6 percent against a basket of nine developed-market peers this year, according to Bloomberg Correlation-Weighted Currency Indexes, the best performance among the 10 currencies tracked by the measure.

Switzerland’s central bank sold 793 million francs ($944 million) of 91-day Treasury bills at an average yield of 0.079 percent today. That’s little changed from the previous auction of similar-maturity securities on May 31, which were allotted at 0.08 percent. The SNB plans to sell bonds due 2031 tomorrow.

--Editors: Mark McCord, Keith Campbell

To contact the reporter on this story: Keith Jenkins in London at kjenkins3@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net


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