Correlation broken!
The Swiss franc, a popular safe haven lately, is rising today even as stocks and other risky assets rise, too. What gives?
For one thing, it's a sign of lingering anxiety about Europe . And apparently the Swiss government is not doing quite enough to curb the franc's strength.
Javier David reports:
The Swiss franc is up by more than 2% against the dollar and euro, as disappointment over a government economic package converged with growing frustration with the Swiss National Bank's lack of concrete measures to weaken the currency.
Global turmoil has sent investors flocking to the franc as a shelter from the various storms buffeting financial markets. On Aug. 9 , the Swiss currency soared to records against the greenback and Europe's single currency, sending Swiss officials to a frenzied search for new policies to keep the franc from undermining the country's exports.
Switzerland initially advanced the idea supporting the country's economy witha round of aid worth 2 billion francs ( $2.5 billion ). But on Wednesday, the government announced a package that, at 870 million francs , was less than half of the original price tag.
With traders already raising questions about the SNB's resolve to suppress the franc's rampant strength, disappointment with the size of the aid package--which in theory would have weakened the franc--sent the franc surging across the board.
Even before the government slashed its aid package, the franc was already marching higher, spurred by nervous investors fleeing the fallout of Europe's debt crisis. In a note to clients Wednesday, Deutsche Bank --the world's largest currency dealing bank--said that the SNB's liquidity-boosting measures were reaching a limit.
(This story has been posted on The Wall Street Journal Online's Market Beat blog at http://blogs.wsj.com/marketbeat.)
By Mark Gongloff
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