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USD/CHF lower as the US fiscal impasse still weighed

Swiss-FrancUS dollar was losing ground also against the Swiss franc on Monday, as market focus was set on the continuing budget worries in the United States and the potential loss of authority for the country to pay its debt obligations, with all that weighing on the greenback.

USD/CHF fell to a session low at 0.9093 during the early phase of Asian trade, after which consolidation followed at 0.9101, losing 0.23% for the day. Support was likely to be received at October 9th low, 0.9020, while resistance was to be met at August 28th high, 0.9235.

It became clear that negotiations between Barack Obama and House Speaker John Boehner broke down over the weekend. Bloomberg reported, that President Obama, in a phone call with House Minority Leader Nancy Pelosi of California, “reinforced that there must be a clean debt limit increase” and a stopgap spending measure also free of policy conditions, before budget negotiations were to begin. Both parties have been negotiating in order to avert nations default, after a lapse in borrowing authority takes effect on October 17th. After this date, the United States will have 30 billion USD plus incoming revenue and would start missing payments between October 22nd and October 31st, according to the Congressional Budget Office.

Democratic policymakers warned during the weekend, that a lack of movement towards an agreement on the budget matter could have an effect on financial markets.

In addition, central bankers and finance ministers, gathering in Washington for the annual meeting of the International Monetary Fund and World Bank during the weekend, called for “urgent action” in order to end the fiscal deadlock in the country.

Meanwhile, Swiss National Bank (SNB) President Thomas Jordan said that the imposed ceiling on the francs exchange rate against the euro remained a vital measure to protect Swiss economy. “The minimum exchange rate is very important,” Jordan said on October 12th in Washington at the joint annual meetings of the International Monetary Fund and the World Bank, cited by Bloomberg. “It remains a crucial tool of our monetary policy in order to avoid a tightening of monetary conditions in Switzerland.” “The euro-Swiss exchange rate is a little bit above the minimum exchange rate, we still have a very strong currency,” he also said. “The Swiss franc is highly valued, it should in a way depreciate over time. Even under the situation at the moment with the discussion over the fiscal situation in the U.S., the exchange rate remained above the minimum exchange rate of 1.20 to 1 euro.”

The central bank imposed the cap on the exchange rate in September 2011, after the franc neared almost a parity with the euro. The SNB is expected to remove the ceiling as soon as the fourth quarter of 2014, according to a survey of nine economists by Bloomberg News, conducted between October 4th and October 9th.

At the same time, the index of producer and import prices in Switzerland increased 0.1% in September on a monthly basis, after rising 0.2% in August. On annual basis, the index remained flat in September in line with preliminary estimates, after rising 0.2% a month ago.

Elsewhere, the franc was higher against the euro, with EUR/CHF cross down 0.10% on a daily basis to trade at 1.2341 at 11:53 GMT. GBP/CHF pair was steady, dipping a mere 0.01% to trade at 1.4547 at 11:55 GMT.

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