The dollar slipped back towards its lows in late European trade on Monday after holding its own for much of its session.
The greenback had initially been aided by a rising chorus of complaints about dollar weakness. The cries of pain encouraged traders to trim their short-dollar positions and bank some profits.
Jean-Pierre Roth, president of the Swiss National Bank, took the lead, warning that the traditional safe-haven status of the Swiss franc could adversely impact on the economy.
“Recent foreign exchange market developments show that in highly turbulent times the Swiss franc can come under upward speculative pressure,” he said. “This may interfere with our domestic monetary strategy and can eventually trigger corrective policy actions.”
The comments initially sent the Swissie lower, but by mid-session New York trading it had returned to SFr1.1403 against the dollar, near a nine-year high, and SFr1.5148 against the euro.
Switzerland is seen as unlikely to intervene in the market to limit currency strength. Astrid Schilo, currency economist at IdeaGlobal, believes the SNB would only act on the Swissie/dollar rate as part of co-ordinated intervention, as in 1995. The Swissie/euro exchange rate is not seen as extreme enough to provoke isolated SNB action, with levels below SFr1.46 needed to trigger rate cuts in 2002 and 2003.
A pause in Swiss monetary tightening, following interest rate rises in June and September, is more likely. While most observers still predict a December hike, the risk of no change has risen.
The Canadian dollar dipped 0.5 per cent to C$1.1841 against the greenback after Ralph Goodale, the Canadian finance minister, warned on Friday that loonie strength “poses a downside risk to growth.”
Asian currencies were little changed after an economic conference passed off without any sign that Beijing was preparing to loosen the renminbi’s ties. Indeed Wen Jiabao, the Chinese premier, repeated that China would not move while under intense external pressure.
Renminbi-dollar one-year non-deliverable forwards narrowed 370 points to a discount of 3,980 points, implying a 12-month rate of Rmb7.88 to the dollar, compared with today’s Rmb8.278. There were also signs of South Korea and Taiwan intervening in the market again, steadying their currencies at Won1,047 and T$32.17 to the dollar respectively.
The subsequent dollar retreat, which saw the greenback slip back to $1.3284 against the euro, Y102.60 against the yen and $1.8946 against sterling, was attributed to Wall Street falling unexpectedly, on top of a slide in US Treasuries
. “A simultaneous sell-off in the dollar, bonds and equities is worrisome,” said Derek Halpenny at Bank of Tokyo-Mitsubishi./www.news.ft.com/