Monday, July 18, 2011

Nomura International: EUR/CHF may Drop to Parity

Economists at OECD say that franc is overvalued by the European currency by 38% and by 46% versus the greenback. Never the less, different experts and strategists think that it still has room to continue appreciation.    

John Taylor, the founder of the world’s largest currency hedge fund FX Concepts, believes that the single currency will fall to the parity with Swiss franc. The specialist claims that the European leaders haven’t come up with any solutions that would help to improve the situation in the euro zone in the longer term. As a result, demand for Switzerland’s currency as a safe haven is likely to remain high.

Currency strategists at Nomura International lowered their forecasts for EUR/CHF from 1.4 to 1.2 by the end of the year pointing out that the pair is likely to reach 1.10 over the next 3 months. In their view, the parity level is quite possible if the crisis keeps escalating.  

The median forecast of economists surveyed by Bloomberg for the end of 2011 declined from April’s estimate of 1.34 to 1.26. The cost to hedge a drop in the euro versus the franc climbed to the maximum since January 2009.

weekly eurchf 14-10

Chart. Weekly EUR/CHF

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