The franc has probably never been so expensive

The Swiss franc is probably more expensive than ever against the euro. On Wednesday afternoon, the euro fell below 0.94 francs against the franc, reaching 0.93525 francs at its early evening low.

According to market observers, this is a record low: “The euro could have fallen even lower when the minimum exchange rate was lifted in January 2015. But it is very uncertain whether such a course has actually been paid for. I think we have never been this low since the creation of the euro,” a trader told news agency AWP.

The US dollar also fell significantly against the franc, falling to 0.8408 francs. This is the lowest level since the minimum exchange rate for the euro was lifted in January 2015. That morning the dollar cost 0.8550, considerably more.

Weakness of the dollar due to interest rate expectations

The dollar also fell significantly against the euro on Wednesday. The reason for the dollar’s weakness remains interest rate expectations. This means that market participants assume that the US Federal Reserve will cut interest rates quickly and sharply in the coming year.

The euro has lost value in the wake of dollar weakness in a market that has been very thin over the years, a trader said. In addition, the euro is also suffering from expectations of interest rate cuts. “Investors are also hoping for interest rate cuts from the European Central Bank soon.” In contrast, the possibility of an interest rate cut by the Swiss National Bank (SNB) is considered much smaller. “I think exchange rates will stabilize again next year,” said the expert.

The dollar has been in a downward trend since mid-December. At the time, projections from the US Federal Reserve indicated that it expected steeper rate cuts in the new year than previously. The market currently assumes that the Fed will cut rates very quickly and significantly in 2024 compared to other major central banks.

Thin trading causes fluctuations

There was hardly any stimulus for the currency markets on Wednesday in the New Year’s Eve week. No significant economic data has been published in either the Eurozone or the US. Many investors in the financial markets have already closed their books for this year. Given the thin trading, larger price drops could occur.

In currency trading, unlike stock trading, there is no official low or high price. It may be that banks have already traded lower prices among themselves.

(hah/sda/awp/international)