UPDATE: Swiss Franc Hits Lowest Level Vs Dollar Since 2008

(Updates with new currency quotes and additional comments from analysts)

NEW YORK -(Dow Jones)- The Swiss franc fell to its lowest level this year against the dollar Monday as investors bought the dollar for its safe-haven status due to fears the worst of the global financial crisis is yet to come.

Analysts also said dollar-supportive comments were also coming Monday from U.S. Federal Reserve Chairman Ben Bernanke, who expressed support for efforts to trigger U.S. economic growth.

The wave of dollar-buying sent it as high as CHF1.1502 intraday, its highest level since December 2007. The euro also slumped, falling to a six-session low under $1.3300, while the U.K. pound is trading at its intraday lows.

The sudden rise in the dollar against its European rivals reverses a downtrend in the U.S. currency that began overnight and into the early part of the North American session.

Currency investors overnight were beginning to feel a sense of optimism regarding the financial crisis as bank-to-bank lending rates seemed to be on a slight decline. The decline in rates was attributed to coordinated measures by major central banks to add liquidity and unlock credit markets. The key three-month dollar Libor fell to 4.06%, down 36 basis points from Friday.

But analysts said currency investors in New York remain unconvinced by the slow move lower in Libor, and also aren't swayed by the modest rise in U.S. stock markets Monday.

"The volatility in stocks is such that it can easily give up its current gains throughout the day, with wild swings," said Matthew Strauss, currency strategist at RBC Capital Markets. "There's still a strong, underlying demand for dollars."

Recently, the euro has begun to inch back, and was trading at $1.3324 from $1.3420 late Friday, while the dollar was at Y101.62 from Y101.47, according to EBS. The euro was at Y135.37 from Y136.23. The U.K. pound was at $1.7139 from $1.7338, and the dollar was at CHF1.1492 from CHF1.1345 Friday.

Some observers said testimony from Bernanke was also boosting the dollar, as it shows a commitment by the central bank to keep the U.S. economy from sinking further into a recession. Speaking on Capitol Hill Monday, Bernanke indicated support for another stimulus package that would make easier access to credit for consumers.

"The Fed is aiming to help limit the depth and duration of the U.S. slowdown," said Divyang Shah, chief strategist at Commonwealth Bank in London.

Analysts also said the U.S. currency was finding support from a meeting of U.S. and French presidents over the weekend and an upcoming meeting of international leaders.

"Agreement on an upcoming meeting of Group of Eight leading industrialized nations' leaders before the end of the year to address the global financial crisis is being viewed by markets as a positive development," said Michael Woolfolk, senior currency strategist, Bank of New York Mellon.

There was little reaction to a U.S. report on leading economic indicators, which rose slightly in September.

-By Dan Molinski, Dow Jones Newswires; 201 938-2245; dan.molinski@dowjones.com

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October 20, 2008 11:52 ET (15:52 GMT)


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