Swiss franc heads for parity with euro
With the Swiss franc likely to continue to strengthen in the near future, parity with the euro is a realistic scenerio.
Before the crisis broke in 2007, one euro bought over 1.60 Swiss francs. Now it buys only 1.20. The Swiss franc is a classic safe haven, while the Swiss economy's sound fiscal fundamentals and relative resilience it is expected to grow by over 2% this year have given the currency an additional fillip. Other typical safe havens such as the yen and the dollar have not been deemed as safe as usual, owing to the earthquake damaging Japanese growth and concern over US borrowing.
The franc's run against the euro looks set to continue. As Nick Hastings says in The Wall Street Journal, jitters over Europe are now prompting investors to shun all eurozone debt. Until two months ago, they bought French and German debt as a safe haven. "A significant change of attitude might be underway," says Simon Derrick of Bank of New York Mellon. There is also the shaky global growth outlook and tighter global monetary policy to consider, which imply more risk aversion. The franc is likely to strengthen in the near future. Indeed, Peter Widmer of the Swiss Export Association thinks that "parity is a realistic scenario".
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