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FOREX-Euro, dollar hold gains vs Swissie, yen firms

Published 03/12/2009, 09:25 PM
Updated 03/12/2009, 09:32 PM
BARC
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* Euro, dollar hold gains vs Swiss franc after SNB move

* Yen firms but Japan not seen following SNB in intervention

TOKYO, March 13 (Reuters) - The euro and the dollar held on to strong gains against the Swiss franc on Friday, after the Swiss National Bank said it was intervening in the foreign exchange market in the face of a growing risk of deflation.

The yen held steady across the board, with strategists saying there was some fund repatriation ahead of the Japanese fiscal year-end on March 31.

The Swiss central bank cut rates on Thursday and said it was implementing a decision to buy foreign currencies, driving the euro up more than 3 percent and the dollar up more than 2.5 percent against the franc..

The decision shocked markets and made the SNB the first major central bank to raise the issue of buying foreign currencies as a way to fight deflation.

"It was very unexpected and the beneficiary was the euro," said Toru Umemoto, chief FX strategist Japan at Barclays Capital.

Umemoto said the question was whether other central banks would follow suit, but he thought this unlikely given major economies' pledges to avoid protectionism.

Japanese authorities have not intervened in the foreign exchange market since March 2004 after a 15-month, 35 trillion yen ($359 billion) selling spree aimed at preventing a strong yen from snuffing out an economic recovery.

Umemoto said Japan was at that time was facing difficulties when other economies were in a much healthier state.

"Currently almost all countries are suffering from the financial crisis and the global recession ... If Japan intervened in the market currently it would be severely criticised."

The euro rose 0.2 percent from Thursday's closing levels to 1.5333 francs, after hitting its highest in more than two months on Thursday.

The franc held steady at 82.19 yen, although it was above Thursday's two-week trough of 81.30 yen.

The dollar also gained 0.2 percent to 1.1873 francs, below Thursday's three-month peak of 1.1969 on trading platform EBS.

The dollar fell 0.14 percent to 97.58 yen and the euro was steady at 126.16 yen.

The euro was also firm at $1.2927, after gaining nearly 0.8 percent on Thursday. ($1=97.49 Yen) (Reporting by Charlotte Cooper; Editing by Michael Watson)

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