Swiss franc hits historic high against ailing euro

The franc hit an all-time high against the euro on Tuesday as the single European currency continued its slide on the foreign exchange markets.

This content was published on September 12, 2000

The franc is now at its highest level against the German mark - one of the currencies the euro is replacing - for more than two decades.

The euro fell to a low of SFr1.5168 in late Asian trading. Against the dollar it sank to $0.8583. By the end of trading in London on Tuesday, the euro stood at SFr1.5230.

Although the euro recovered its losses slightly in European trading, analysts are becoming increasingly concerned about how far the currency might fall.

The renewed strength of the Swiss economy is one of the main reasons behind the franc's rally. Many traders are expecting an imminent interest rate rise as the economy continues to grow.

But economic analysts say the stronger the franc gets, the less likely the Swiss National Bank will be to raise rates. They say the bank is likely to sit tight rather than implement an increase that will further strengthen the currency.

The other reason for the franc's rise is the lack of confidence in the European Central Bank.

"We have seen the euro weakening due to a lack of credibility. The ECB has not been able to calm the market so there is a capital flow out of the euro into the dollar and the Swiss franc," says Marcus Allenspach, an economist at Cantrade private bank.

Allenspach told swissinfo that investors see the dollar and the franc as better bets to preserve their capital.

The strength of the franc against the euro is worrying for the country's exporters whose biggest market is Germany. A strong currency will make Swiss exports more expensive and could see customers shopping around for cheaper alternatives.

The franc's rise against the euro has not helped it against the dollar. It remains at 11 year-lows against the US currency, whose strength continues on the back of a roaring economy.

In London trading late on Tuesday the dollar was at around SFr1.77.

by Michael Hollingdale

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