US dollar climbed to the highest level in one month against the Swiss franc on Tuesday, as expectations grew that the Federal Reserve Bank may scale back its asset purchases this month, giving support to the greenback.
USD/CHF hit a session high at 0.9374 at 7:34 GMT, also the pairs highest point since August 15th, after which consolidation followed at 0.9360, gaining 0.15% for the day. Support was likely to be found at August 30th low, 0.9289, while resistance was to be met at August 15th high, 0.9396.
Earlier today it became clear that Swiss economy expanded at a faster than projected pace during the second quarter of the year, supported mainly by increased private expenditures and business investments. The Gross Domestic Product of the country rose by 0.5% on a quarterly basis, following the 0.6% increase during the first quarter, while preliminary estimates pointed a 0.3% gain. Consumer expenditures rose by 0.6% during Q2 compared to Q1, while investment costs increased at a steady rate, by 1.4%, during the same period, following the 0.2% decrease in the first quarter. Trade balance, however, caused negative influence in evaluation of countrys GDP, showing weaker export and higher import figures. In annual terms, Swiss economy advanced 2.5% during Q2, after a 1.2% gain in the first quarter, as the latter was a revision up from a 1.1% gain previously.
Since the Swiss National Bank (SNB) set a cap on the EUR/CHF pair at 1.2000 on September 6th 2011, countrys economy has experienced just one quarter of contraction, while the debt-plagued euro region managed to emerge from a 18-month recessionary period in Q2 2013. As the debt crisis subsided, the franc depreciated 2.1% against the euro during this year, which allowed the SNB to abstain from major interventions. In 2012 the bank poured 188 billion CHF or 201 billion USD, defending the cap, and as a result of that it now holds foreign currency equal to three-quarters of Switzerland’s annual output.
“The franc is still overvalued, albeit less strongly than in 2011,” said Maxime Botteron, an economist with Credit Suisse Group AG in Zurich, cited by Bloomberg. “We don’t think the SNB will change its stance before the end of 2014.”
Meanwhile, the demand for the greenback was underpinned by expectations of a possible scale back to Federal Reserves easing program this month and one indicator that may greatly influence Feds decision is expected to be the manufacturing activity index, scheduled for release later on trading Tuesday.
Elsewhere, the franc was steady against the euro, with EUR/CHF dipping 0.01% on a daily basis to trade at 1.2329 at 12:30 GMT.
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