LIVE MARKETS-The Swiss franc/yen conundrum

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THE SWISS FRANC/YEN CONUNDRUM

While Japan is poised to raise interest rates, Switzerland is not ruling out a return to negative rates, with deflationary pressures emerging as a significant concern.

But that backdrop didn’t prevent the Swiss franc from rising against major currencies as investors look for safe-haven assets and hitting 186 against the yen CHFJPY=EBS — an all-time high — both on Tuesday and in mid-July.

The question now is whether the franc will continue climbing in the coming days and weeks, or if it's time to reconsider bullish bets on the Swiss currency.

ING suggests strategic long positions in the Swiss franc following recent comments from Swiss National Bank's (SNB)chairman Martin Schlegel that he sees a high bar before reintroducing negative interest rates.

But it did not specifically mention the cross with the Japanese yen.

Analysts also recall that both the Swiss franc and the yen are established safe havens.

“Although the market favours a steady policy outcome from the SNB this month, Swiss rate setters have previously used the element of surprise to their advantage,” says Jane Foley, senior forex strategist at Rabobank, before arguing that a rate cut by SNB this month or in December remains a firm risk.

“We favour selling rallies in Swiss franc/yen and forecast a move to the 179 area on a 3-month view,” she adds.

(Stefano Rebaudo)

EARLIER LIVE MARKETS POSTS

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EARNINGS MATTER CLICK HERE

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