July 6 (Bloomberg) -- The Swiss franc rose against the euro after Moody’s Investors Service cut Portugal’s credit rating to junk, stoking demand for the safest assets.
Switzerland’s currency gained against all but three of 16 major peers tracked by Bloomberg. The Swiss government said today that the currency was in a “phase of overvaluation,” and the central bank may act if a “worsening of the situation” threatens the nation’s growth. Portugal’s downgrade prompted a selloff in bonds from Europe’s most indebted countries.
The downgrade “is a nasty reminder that the euro is not in the clear yet,” said Geoffrey Yu, a strategist at UBS Securities LLC in London. The franc’s gains are “mostly driven by the euro,” he said.
The franc appreciated 0.9 percent to 1.2027 per euro as of 5 p.m. in London. It was little changed against the dollar at 83.96 centimes.
The franc has risen 10 per cent against the euro in the past year as the sovereign-debt crisis in the 17-nation currency bloc worsened.
The Swiss National Bank may engage in bond purchases, known as quantitative easing, to counter those gains, according to Henrik Gullberg, a strategist at Deutsche Bank AG.
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