Swiss francs probably more expensive than ever
Published: Wednesday, Dec 27th 2023, 18:50
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The Swiss franc is probably more expensive than ever against the euro. On Wednesday afternoon, the euro fell below CHF 0.94 against the franc, reaching a low of CHF 0.93525 in the early evening.
According to market observers, this is a record low: "It is possible that the euro fell even lower when the minimum euro exchange rate was lifted in January 2015. But whether such a rate was actually paid is very, very uncertain. I don't think we've ever been this low since the euro has existed," a trader told the news agency AWP.
The US dollar also fell significantly against the franc, dropping to 0.8408 francs. This is the lowest level since the minimum euro exchange rate was lifted in January 2015. The greenback was still trading at 0.8550 in the morning, which was significantly higher.
Dollar weakness due to interest rate expectations
The dollar also fell significantly against the euro on Wednesday. The reason for the dollar's weakness continues to be interest rate expectations. In other words, market participants assume that the US Federal Reserve will cut interest rates quickly and sharply in the coming year.
The euro lost value in the wake of the weak dollar in a very thin market between the years, said a trader. The euro is also suffering from expectations of interest rate cuts. "Investors are also hoping for interest rate cuts by the European Central Bank in the near future." In contrast, the possibility of an interest rate cut by the Swiss National Bank (SNB) is seen as much lower. "I think exchange rates will stabilize again next year," said the expert.
The dollar has been on a downward trend since mid-December. At the time, projections by the US Federal Reserve indicated that it expected to cut interest rates more sharply in the new year than previously. The market currently assumes that the Fed is likely to cut interest rates particularly quickly and significantly in 2024 compared to other major central banks.
Thin trading causes swings
There was hardly any impetus for the currency markets on Wednesday in the old year's week. No important economic data was published in either the eurozone or the USA. Many investors on the financial markets have already closed their books for the year. In view of the thin trading, there may therefore be more significant price movements.
Also, unlike share trading, there is no single official lowest or highest price in foreign exchange trading. Banks may have already traded lower rates among themselves.
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