The euro and the dollar both fell to session lows against the Swiss franc as demand for the safe haven currency is back amid a gloomy global economic outlook and absence of Swiss National Bank intervention to curb the franc strength.
USDCHF touched a U.S. session low of 0.7873 by 13.00 GMT from the session open of 0.7910 and EURCHF reached lows of 1.1401 from the session high of 1.1443.
Safe havens are still in high demand since the threat of a debt contagion within the euro zone is still possible and also added to these concerns is the fact that the world’s powerhouse, the U.S. economy, is slowing down and may need further stimulus.
There is uncertainty over what Federal Reserve Chairman Ben Bernanke may unveil in his speech in Jackson Hole, Wyoming this Friday, where he meets with other policy makers and central bankers. There is some speculation that he may signal further measures to boost the ailing U.S. economy, which could entail further monetary easing, resulting in flooding the system with more U.S. dollars, this weakening the currency.
With the market focused this week on what Bernanke may or may not say at Jackson Hole, it may be advisable to buy the Swiss franc against the dollar, just to protect against any uncertainty.
If Bernanke does hint on a third round of quantitative easing, then the USDCHF pair seems almost certain to come under pressure. On the other hand if the Fed does not signal any more stimulus then this will dampen risk appetite and push investors to the safe haven Swiss franc, which is in demand when risk aversion is high.