Franc Breaches Cap Versus Euro, Dollar at Three-Week High - 6.4.2012

US Dollar The dollar accelerated gains yesterday against the majors, except the aussie and the loonie. The currency’s index climbed to 80.17, touching the highest level since March 16, before the data today that may show US nonfarm payrolls rose by 205000 in March following a 227000 increase in the prior month. At the same time the unemployment rate is expected to stay at a three-year low of 8.3%. However the dollar’s gains were limited yesterday against the Australian and Canadian counterparts, as the March net employment change in Canada significantly exceeded estimations and China’s, Australian biggest trading partner, services industry expanded in March. Euro Rising concerns about a new wave of the European debt crisis are driving the region’s currency lower and lower. Yesterday the euro dived to the lowest level since March 15 versus the dollar – 1.3034, to the lowest since March 8 against the Japanese yen – 106.88, and even fell below 1.2000 versus the Swiss franc touching yesterday 1.1998. Although the morning session was rather quiet, the single currency dropped to the lowest since January 9 against the British pound – 0.8236. On Thursday the data from Germany showed industrial production dropped in February more than expected – by 1.3%, compared with a 1.2% increase in the previous month. Along with the depreciation of the region’s currency investors remain concerned about the European debt crisis. Despite the ongoing debt restructuring in Greece and the announced temporary increase in the region’s bailout fund alerts are coming from Spain, Italy and Portugal. Earlier this week Spain’s Prime Minister Rajoy said that the nation faced “extremely difficult” challenges and that the public debt could increase to 79.8% this year, compared with 68.5% in 2011. The nation’s 10-year bond yields climbed yesterday to 5.84%, the highest since December 2011, exceeding 400-point spread with similar German bunds. Swiss Franc The Swiss franc was mixed yesterday. The dollar rose to 0.9222, the highest since March 16 and remained close to 0.9200 in Asian trading hours. The euro on the other hand fell below 1.2000 versus the franc, touching 1.1998, but traded above 1.2000 in the morning. In September 2011 the Swiss National Bank pledged to protect the 1.2000 ceiling versus the euro by selling the national currency in unlimited quantities. However that was the first breach of the ceiling since September. Earlier this week the Bank reported its foreign currency reserves rose to 237.5 billion francs by the end of March from 227.2 billion francs one month ago, with CPI growth pace falling to minus 1% in March.