The Swiss Franc made gains against its peers on Wednesday as concerns over a possible Greek default and mixed economic data out of the US caused investors to seek shelter in the safe-haven currency.
The Pound Sterling to Swiss Franc (GBP/CHF) exchange rate is trading at 1.4598. The Euro to Swiss Franc (EUR/GBP) exchange rate is trending in the region of 1.0348.
After the Swiss National Bank (SNB) stunned the markets by ditching the Francs cap to the Euro in January, the currency lost its appeal as a safe-haven asset. Now, however, investors are once more flocking back to the Franc as market turmoil and geopolitical concerns dominate the headlines.
Traders are confident that Switzerland is now stable and that it will not risk damaging its status as one of the world’s most stable economies. With the turmoil being generated by the Greek debt crisis and worries over global economic growth, the Franc appears to have settled back into its old pattern of rising when risk aversion is high and falling when it is low. Also aiding its haven status is the fact that Switzerland has not had a trade deficit for 15 years, meaning that it is not reliant on foreign investment to fund its budget.
Concerns over the escalation of the conflicts in the Middle East, worries over Ukraine, a slowing global economy and the possibility of a Greek default and possible exit from the Eurozone have bolstered demand for the Franc. Today, the Swiss Franc moved away from a 4-week low against the US Dollar and strengthened from a 5-day low against the Pound Sterling.
Greece must repay four loans totalling €1.6 billion to the International Monetary Fund (IMF) next month. Fears are growing that Athens will be unable to make the first repayment, due on June 5 unless a deal on economic reforms is reached with its creditors in Europe.
Further gains for the Swiss Franc were restrained as the session progressed after data showed that Swiss consumption dropped in April. According to UBS, the alpine nation’s consumption index fell from the 1.34 figure seen in March to 1.25. The main cause for the drop was a fall in the number of new car registrations.
The Swiss Franc is forecast to experience more movement on Thursday due to the release of the latest Swiss Balance of Trade data.