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4 Mar 2013
Forex Flash: USD/CHF forming a long term base - UBS
Dollar sceptics should take a look at USDCHF, with "the charts forming a long term base" says Mansoor Mohi-uddin, Head of FX at UBS. "This matters as the pair is the closest proxy for the old USDDEM rate" he notes.
Mansoor notes: "First, the Swiss franc is a shadow currency for Germany's economy. Switzerland has close trading links with its northern neighbour. Its fiscal position is similarly strong and the Swiss National Bank's large foreign reserves are reminiscent of the Bundesbank's traditional holdings. Second, USDCHF is a 'cleaner' currency pair than EURUSD. It has much less speculative flows. It doesn't suffer the same headline risks from the Eurozone debt crisis."
Additionally, "there's been very little official FX intervention in USDCHF in the past few decades. As a result, USDCHF gives a clearer picture of rate developments between America and Germany, and this picture is pointing up for the dollar" he adds.
Mansoor notes: "First, the Swiss franc is a shadow currency for Germany's economy. Switzerland has close trading links with its northern neighbour. Its fiscal position is similarly strong and the Swiss National Bank's large foreign reserves are reminiscent of the Bundesbank's traditional holdings. Second, USDCHF is a 'cleaner' currency pair than EURUSD. It has much less speculative flows. It doesn't suffer the same headline risks from the Eurozone debt crisis."
Additionally, "there's been very little official FX intervention in USDCHF in the past few decades. As a result, USDCHF gives a clearer picture of rate developments between America and Germany, and this picture is pointing up for the dollar" he adds.