Investing.com – The U.S. dollar rallied to a six-month high against the Swiss franc on Thursday, after the Federal Reserve warned about "significant downside risks" to the U.S. economy, spurring a flight to safety.
USD/CHF hit 0.9179 during European morning trade, the pair’s highest since April 8; the pair subsequently consolidated at 0.9174, jumping 1.94%.
The pair was likely to find support at 0.8975, the day’s low and resistance at 0.9294, the high of April 6.
After its policy meeting on Wednesday, the Fed announced a plan to trade short-term bonds for long-term ones, in an attempt to boost the economy by pushing down long-term interest rates, in a move dubbed “Operation Twist.”
But risk appetite was hit after the central bank warned that the U.S. faces a grim economic outlook.
“There are significant downside risks to the economic outlook, including strains in global financial markets,” the Fed said.
Risk aversion escalated after reports earlier showed that German manufacturing output fell to a 24-month low in September, while manufacturing activity in the 17-nation single currency bloc slumped to the lowest since August 2009.
The reports came after data showed that Chinese factory output fell for a third consecutive month in September, fanning fears over a slowdown in the world’s second largest economy.
The dollar has benefited from increased safe haven inflows since the Swiss National Bank’s intervention to halt the appreciation of the Swiss franc earlier this month.
Meanwhile, the Swissie was sharply lower against the euro, with EUR/CHF surging 0.91% to hit 1.2330. Earlier in the week, the spokesman for the SNB refused to comment on speculation that the central bank would adjust the franc ceiling of 1.20 against the euro.
Also Thursday, the ZEW Centre for European Economic Research said its index of Swiss economic sentiment fell for the fifth consecutive month in September, as a strong Swiss franc and concerns over the euro zone’s sovereign debt crisis weighed.
USD/CHF hit 0.9179 during European morning trade, the pair’s highest since April 8; the pair subsequently consolidated at 0.9174, jumping 1.94%.
The pair was likely to find support at 0.8975, the day’s low and resistance at 0.9294, the high of April 6.
After its policy meeting on Wednesday, the Fed announced a plan to trade short-term bonds for long-term ones, in an attempt to boost the economy by pushing down long-term interest rates, in a move dubbed “Operation Twist.”
But risk appetite was hit after the central bank warned that the U.S. faces a grim economic outlook.
“There are significant downside risks to the economic outlook, including strains in global financial markets,” the Fed said.
Risk aversion escalated after reports earlier showed that German manufacturing output fell to a 24-month low in September, while manufacturing activity in the 17-nation single currency bloc slumped to the lowest since August 2009.
The reports came after data showed that Chinese factory output fell for a third consecutive month in September, fanning fears over a slowdown in the world’s second largest economy.
The dollar has benefited from increased safe haven inflows since the Swiss National Bank’s intervention to halt the appreciation of the Swiss franc earlier this month.
Meanwhile, the Swissie was sharply lower against the euro, with EUR/CHF surging 0.91% to hit 1.2330. Earlier in the week, the spokesman for the SNB refused to comment on speculation that the central bank would adjust the franc ceiling of 1.20 against the euro.
Also Thursday, the ZEW Centre for European Economic Research said its index of Swiss economic sentiment fell for the fifth consecutive month in September, as a strong Swiss franc and concerns over the euro zone’s sovereign debt crisis weighed.