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Swiss franc heads for second week of declines on carry trade

The Swiss franc is set to fall for a second week against the euro as investors take advantage of the so-called carry trade.

A carry-trade involves borrowing in a currency with relatively low interest rates to invest in higher yielding assets abroad. The franc fell yesterday to its lowest since May 1999, the year the euro was introduced. Rates in Switzerland are the second lowest among industrialized nations after Japan, whose central bank left its benchmark rate on hold yesterday. „Appetite for the carry trade has returned once again with the BOJ keeping rates on hold” said Niels From, a currency strategist at Dresdner Kleinwort in Frankfurt. „This has the kept the low yielding funding currencies such as the Swiss franc and the yen under pressure.” The Swiss franc traded at 1.6180 per euro at 1:05 p.m. in Zurich, from 1.6118 on January 12, after yesterday slipping to 1.6198, its lowest since it touched 1.6210 in May, 1999. It was also at 1.2480 versus the dollar, from 1.2472. (Bloomberg)