Swiss Franc Drops; SNB Has No Comment

NEW YORK (Dow Jones)--The Swiss franc dropped sharply in intraday trade against the euro and dollar amid fears the Swiss National Bank might intervene in currency markets.

The Swiss National Bank has declined to comment.

The euro abruptly swept up from the CHF1.5145 area to hit an intraday high of CHF1.5201. It has since settled back at around CHF1.5158.

The dollar gained from CHF1.0407 to CHF1.0466. It too has declined some since and is trading near CHF1.0439.

Within the last 24 hours, analysts said the Swiss franc's trade-weighted index, which is comprised of the euro and dollar, was close to the level at which the SNB last intervened in late June.

The SNB has been intervening periodically in the foreign exchange market since March to contain advances in the Swiss Franc to protect the country's exporters and fight deflation.

Late last month, with the euro trading at around CHF1.52, SNB member Thomas Jordan said the central bank "won't accept further strengthening of the Swiss franc."

Traders always watch carefully when the euro sinks to the CHF1.5150 area as that is widely seen as the edge of the SNB's tolerance.

Currency strategists added that there isn't a lot of conviction in the market, but there is a lot of anxiety. This is causing significant currency-market volatility.

While the euro's move was significant compared to intraday action, on a day-to-day basis, it is not notably higher. Wednesday, it was at CHF1.5166 late in the New York session.

Thursday morning in New York, the euro was at $1.4531 from $1.4551 late Wednesday, according to EBS via CQG. The dollar was at Y91.90 from Y92.08. The euro was at Y133.56 from Y133.90. The U.K. pound was at $1.6635 from $1.6535, and the dollar was at CHF1.0429 from CHF1.0425.

The euro also fell to a session low against the dollar, reversing an earlier rally to a fresh nine-month high of $1.4608.

The common currency fell as low as $1.4502.

Other than volatility and uncertainty, strategists said the euro may have come under pressure on concerns that the SNB could buy dollars in a potential intervention, affecting the euro exchange rate against the dollar.

Back in June, traders saw the SNB buying dollars on the Electronic Broking System, or EBS.

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Yen Extends Rally To 7-Month High Vs Dollar

NEW YORK (Dow Jones)--The yen extended its recent rally Friday, marking a fresh seven-month high against the dollar.

The yen also advanced to a one-week high against the euro, as it broke closely watched levels against the dollar that drove traders to buy Japan's unit.

The next level eyed for the dollar is Y89.80, a break of which could send the dollar tumbling again.

"We continue to view the yen as likely to surprise," said analysts at Credit Suisse.

They forecast that a recovery in global production will support Japan's exporter revenue and increase foreign demand for Japanese equities. In addition, interest rates for major currency rivals are "too low" to attract local investors out of Japan.

Friday afternoon in New York, the euro was at $1.4582 from $1.4584 late Thursday, according to EBS via CQG. The dollar was at Y90.64 from Y91.70. The euro was at Y132.21 from Y133.73.

UBS said the Bank of Japan may have to tackle the issue of a strong yen at its policy meeting next week.

Meanwhile, the U.K. pound was at $1.6677 from $1.6658, while the dollar was at CHF1.0372 from CHF1.0385.

The dollar has been broadly weaker, sold on dropping long-term U.S. interest rates, which signal the market expects the Federal Reserve to keep the yield on the U.S. currency at very low levels well into next year.

Data from the British Bankers' Association showed three-month dollar Libor, an important gauge of the effectiveness of the Fed's monetary policy, slipped to 0.299% from Thursday's 0.29969%, albeit above the record low of 0.29869% seen Wednesday.

"The move has been so rapid," said Hidetoshi Yanagihara, a currency strategist at Mizuho Corporate Bank in New York. "Rates are coming off much faster than the market thought," he said, leading traders to sell the dollar.

The mid-point for Japan's fiscal year may also be leading to some repatriation into the yen, said analysts.

While the euro advanced to a fresh nine-month high of $1.4636 Friday, intraday volatility in equities and crude-oil markets, as well as profit-taking and the expiration of options contracts, undercut those gains.

Positive U.S. data also provided some momentary support for the U.S. unit.

The Reuters/University of Michigan preliminary consumer sentiment index for September gained to 70.2 from 65.7 in August, compared with economist expectations for a reading of 67.5.

But Barclays Capital and other institutions believe the dollar has further to fall in the near term.

Currency positioning among private and official investors isn't yet at extreme levels that they would require a bounce back, according to Barclays.

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Euro Continues Gains On Eased Trade Fears

NEW YORK (Dow Jones)--The euro gave up some of its gains after hitting a nine-month high against the dollar Monday, but it still remained higher on the day as risk appetite continued to drive markets.

Concern over a trade dispute between the U.S. and China had led investors back to the safe-haven dollar overnight, causing the euro to open New York trading down on the U.S. currency. The dollar had been under pressure since the euro broke through its summer ranges after the U.S. Labor Day holiday early last week.

But worries over the dispute lifted somewhat after China filed a complaint with the World Trade Organization over a U.S. tariff on Chinese tires, as opposed to issuing unilateral counter-tariffs, analysts said.

"The first fears that hit the market were that maybe this dispute was going to become something much bigger; those fears have kind of dissipated," said Steve Englander, chief currency strategist at Barclays Capital in New York.

That sent investors back to a "risk-on" strategy, propelling the euro to a nine-month high of $1.4654, before the common currency retreated towards $1.46 in late afternoon trading. U.S. stock markets were up modestly Monday.

Commodity-based currencies, such as the Australian dollar and Canadian dollar, remained shaken by the possibility of a trade disruption, analysts said.

The Canadian dollar was hit "because of [the trade dispute's] potential impact on the global recovery and due to fears of the effect of increasing U.S. protectionism on Canadian exports to the U.S.," said currency strategist Camilla Sutton of Scotia Capital in Toronto.

The dollar was at C$1.0834, after stretching as far as C$1.0925 earlier in the session, its highest level against the Canadian currency in more than a week.

Late Monday afternoon in New York, the euro was at $1.4612 from $1.4582 late Friday, according to EBS via CQG. The dollar was at Y91.00 from Y90.64. The euro was at Y132.98 from Y132.21. The U.K. pound was at $1.6562 from $1.6677, while the dollar was at CHF1.0355 from CHF1.0372.

To see the dollar's move against the Canadian dollar, please see:

http://dowjoneswebservices.com/chart/view/2783

Investors Tuesday will be paying close attention to U.S. retail sales figures for August, which are scheduled to be released at 8:30 a.m. EDT. Retail numbers are expected to improve from July. Analysts said the data could move currencies.

If the numbers come in as expected or better, risk appetite should strengthen, lending support to the euro. If the numbers disappoint, investors could again turn to the safe-haven dollar on fears of a stalled economic recovery.

"A weaker number will give grist to those who think this risk rally has run its course and that, ultimately, we're looking at a pretty weak recovery," said Brian Dolan, chief currency strategist at Forex.com in New Jersey.

Traders will be watching a key technical level for the euro at $1.4575.

"As long as we stay above there, we'll probably stay pretty firm," said Andrew Chaveriat of BNP Paribas in New York.

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