September 7, 2011 in Business

Swiss bank caps franc as dollar gains value

Associated Press
‘Safe haven’ currencies

Like the Swiss franc, the Japanese yen is considered a safe-haven currency because Japanese investors hold much of the country’s massive public debt. The U.S. dollar, the other safe-haven currency, is the world’s reserve currency, and the U.S. is the world’s largest economy.

NEW YORK – The U.S. dollar rose against the Swiss franc Tuesday after Switzerland’s central bank took the unusual step of putting a cap on the value of its currency. The dollar also rose against the euro, pound and yen.

The Swiss franc, considered a safe-haven currency by investors, had risen sharply against the dollar and euro this year as fears of slowing growth hit global markets.

The Swiss National Bank said it will spend whatever it takes to keep the euro from falling below 1.20 francs.

In late trading Tuesday, the dollar jumped to 0.8615 Swiss franc, its highest point since May 27. It was worth 0.7861 Swiss franc late Monday. The euro fell to $1.3991 from $1.4091. It was the first time the euro has fallen below the $1.40 mark since July 13.

Kathy Lien, director of currency research at GFT, said that the Swiss National Bank’s actions could stabilize the currency for at least the next few months. However, Lien said in a research note, “as long as the eurozone continues to be mired in debt troubles, investors will still be tempted to park their money” in the Swiss franc.

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