Today's currency intervention: Switzerland tries to kick traders out of its franc


Swiss Franc Plunges From Record Versus Euro on Interest-Rate Cut

By Allison Bennett and Anchalee Worrachate
Bloomberg News
Wednesday, August 3, 2011

The Swiss franc fell against most of its major peers after the central bank unexpectedly cut interest rates to weaken the currency after it strengthened to records and threatened the nation’s economic recovery.

The franc dropped the most in more than two years against the euro after touching a record high as the Swiss National Bank said it will increase the supply of the currency to money markets. The yen fell versus the euro on speculation the Bank of Japan will take steps to stem the currency's advance. The dollar remained lower after Moody's Investors Service said yesterday the U.S. is still at risk of losing its top credit rating.

"We've seen such dramatic moves in yen and Swiss and the pace of appreciation," said Camilla Sutton, head of currency strategy at Bank of Nova Scotia in Toronto. "We're starting to see central banks grow increasingly unnerved by these moves."

The franc depreciated 1.6 percent to 1.0999 versus the euro at 9:31 a.m. in New York, from 1.0827 yesterday, after falling as much as 3 percent. That was the most since March 12, 2009, when the SNB said it began selling the franc. It gained as much as 3.1 percent yesterday. The currency earlier today touched a record 1.0796. It slid 0.8 percent to 76.83 centimes against the dollar after rising yesterday as much as 2.7 percent.

Switzerland's currency was the top performer yesterday among the most-traded currencies tracked by Bloomberg, and the yen was No. 2. The franc still maintains a 4.9 percent gain versus the euro and a 4.4 percent increase against the dollar over the past five days. The yen is the second-best performer amongst the most-traded currencies tracked by Bloomberg, rising 1.3 percent against the greenback and 1.7 percent versus the 17- nation currency.

... Dispatch continues below ...


Golden Phoenix Q2 2011 Conference Call Posted at Company Internet Site

The second quarter 2011 conference call of Golden Phoenix Minerals Inc. (GPXM) has been posted at the company Internet site for immediate playback. The call includes updates on the start of gold production at the company's Mineral Ridge gold project in Nevada, the letter of intent to acquire the Santa Rosa gold mine in Panama, and the company's due-diligence efforts to secure a senior stock exchange listing.

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The Organization for Economic Cooperation and Development's measure of purchasing power parity suggests the franc is 49.5 percent overvalued against the dollar and 42 percent overvalued versus the euro.

The Swedish krona rose versus most major currencies on speculation the country's economic growth will warrant further interest-rate increases. Sweden's gross domestic product grew more than estimated in the three months through June, increasing a seasonally adjusted 1 percent, data on July 29 showed.

The krona strengthened 0.4 percent against the euro to 9.0744 and rose 1.2 percent versus the dollar to 6.3384.

Norway's krone rose 0.4 percent to 7.6658 per euro and climbed 1.2 percent to 5.3532 to the greenback.

IntercontinentalExchange Inc.'s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro and yen, fell for the first time in three days. It dropped 0.7 percent to 74.023 after Moody's said yesterday the U.S. credit rating may be cut for the first time.

The U.S., rated Aaa since 1917, was placed on a negative outlook even as Moody's confirmed the top rating after President Barack Obama signed into law a plan to lift the nation's borrowing limit and cut spending.

The dollar depreciated 0.8 percent to $1.4322 versus the euro, from $1.4203 yesterday. The yen dropped 0.7 percent to 110.32 per euro and slipped 0.2 percent to 77.03 per dollar.

Companies in the U.S. added 114,000 workers in July after a revised increase of 145,000 in June, ADP Employer Services estimated in a report today. The median forecast in a Bloomberg News Survey was for a gain of 100,000 jobs.

The Swiss National Bank lowered its target for the three-month London interbank offered rate to "as close to zero as possible," from 0.25 percent. The Zurich-based central bank said it will also expand banks’ sight deposits, or cash that can be withdrawn on demand, to 80 billion Swiss francs ($104 billion), from 30 billion francs, and repurchase outstanding SNB bills, according to an e-mailed statement today.

The franc soared 23 percent in the past 12 months, making it the best-performing currency among 10 developed-nation peers, according to Bloomberg Correlation-Weighted Currency Indexes. The currency had gained favor as bond yields soared across the euro region’s most indebted nations and Portugal and Ireland followed Greece in requesting international financial rescues.

Today's decline may be short-lived as investors will continue to seek a haven amid signs of slowing global growth, according to Peter Rosenstreich, Geneva-based chief currency analyst at Swissquote Bank SA.

The "shot over the bow will inevitably grab headlines and spook traders who were burnt in 2009-2010 foreign-exchange interventions," said Rosentreich in an e-mailed note. "Should the SNB continue toward an interventionist policy, watch for forex history to repeat itself. When the rhetoric dies down and smoke clears, flows into the franc will continue."

Concern that the euro-region debt crisis will deteriorate and increase stresses in the financial markets will also support demand for the franc, said Ken Dickson, an investment director of currencies in Edinburgh at Standard Life Investments Ltd.

"Unless you get a resolution to the euro debt crisis, it's unlikely that negative interest rates in Switzerland will make too much of a difference," said Dickson, whose company has more than $250 billion in assets.

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Prophecy Platinum Reports 10.97 Million Ounces Inferred
and 1.04 Million Ounces Indicated PGM+Gold in Yukon

An independent resource report on the Wellgreen project in the Yukon Territory in Canada has just confirmed that it as one of the largest platinum group metals projects in Canada and one of the few outside South Africa, Prophecy Platinum Corp. Chairman John Lee says.

The report, compliant with Canadian National Instrument 43-101, was written by geologist Todd McCracken of Wardrop Engineering Inc., a Tetra Tech company. It incorporated drill data from 701 diamond drill holes (182 surface and 519 underground) totaling more than 53,222 metres. Using a 0.4 percent nickel equivalent cutoff grade, the Wellgreen deposit now contains a total inferred resource of 289.2 million tonnes at an average grade of 0.53 g/t platinum, 0.42 g/t palladium, 0.23 g/t gold (1.18 g/t PGM and gold), 0.38 percent nickel, and 0.35 percent copper. Separately, the deposit also contains an indicated resource of 14.3 million tonnes at an average grade of 0.99 g/t platinum, 0.74 g/t palladium, 0.52 g/t gold (2.25 g/t PGM and gold), 0.69 percent nickel, and 0.69 percent copper.

Prophecy Platinum Corp. trades on the Toronto Venture Exchange under the symbol NKL, on the pink sheets in the United States as PNIKD, and in Frankfurt as P94P.

For the complete press release on the Wellgreen report, please visit: