• Our scenario featuring a shift to a higher level of the exchange rate of the Swiss franc still holds, and we see a stronger risk of the franc appreciating from its current level.

  • Jyske Bank does not believe in a double dip recession in the US, but a string of weak economic indicators from over there has held the subject on the agenda for the past weeks. This has boosted risk aversion in the financial markets, and the franc has been appreciating.

  • The franc has gained almost 6% against the euro since the beginning of August, and the CHF/EUR rate is approaching a new test of the low of about 130.70 reached on 1 July (CHF/DKK: about 5.70).

  • In connection with the latest monetary-policy meeting in June, the Swiss National Bank (SNB) signalled that its intervention policy had been shelved, because the central bank is seemingly not overly concerned that appreciation of the franc will significantly affect the Swiss economy. So there is currently no indication that the SNB intends to intervene against the current fluctuations of the exchange rate.

  • The debt crisis in Southern Europe and the uncertainty about the global economy have so far prompted the SNB to leave interest rates unchanged. However, developments in the domestic economy in isolation indicates that an interest-rate hike may be appropriate. If the SNB indicates a monetary-policy tightening before the ECB does, it will be another supportive factor for the currency.

  • Fundamentally, there are many indications of a stronger franc for the period ahead.

  • From the technical point of view, the EUR/CHF rate has resumed its downtrend after a fair correction, and it is now approaching the very important level around 130.70 (CHF/DKK: 5.70). If the point is breached, three new target areas on the downside will be actuated, viz. 127 (CHF/DKK: 5.8650), then 123 (CHF/DKK: 6.0550)and finally120.50 (CHF/DKK: 6.1825).

  • At first sight, it would seem that we may be in for consolidation within the range of 131- 134.10 (CHF/DKK: 5.5550-5.6900), but we reiterate our expectation of a shift of the exchange rate for the franc, with the new stronger level being maintained for the short as well as the long term.

  • The new major range of CHF/DKK is now 5.32-6.18 (corresponding to 120.50-140 of the EUR/CHF.

  • It is therefore still very risky to have CHF funding, and breach of 130.70 of the EUR/CHF rate (CHF/DKK: 5.70) may cause the franc to appreciate further.

  • Investors should therefore use corrections towards 140 of the EUR/CHF rate (towards CHF/DKK 5.32) to close their Swiss franc funding.

  • If the EUR/CHF rate drops below 130.70 (corresponding to CHF/DKK of 5.70), we recommend in any case that Swiss franc funding be closed down.