Euro rallies on speculation of SNB intervention

London

THE euro rose strongly across the board on Thursday, gaining more than one per cent against the Swiss franc, as traders speculated that the Swiss National Bank (SNB) was again buying euros in order to weaken the franc.

Having fallen around two US cents late on Wednesday after the European Central Bank (ECB) said it would no longer accept Greek bonds in return for funding, the euro gained around 0.7 per cent versus the dollar on Thursday, trading at US$1.1420.

Against the Swiss franc, the euro rose to 1.06425 francs, its strongest since Jan 15, when the SNB stunned markets by scrapping the three-year-old cap on its currency.

Since then, there has been persistent talk that the SNB has still been intervening. Swiss newspaper Schweiz am Sonntag reported on Sunday that the SNB was informally aiming for a rate of 1.05-1.10 francs per euro, citing sources close to the bank.

Against the yen, the euro was up 0.8 per cent at 134.09 yen , still some way off a near two-week high of 135.35 yen set on Wednesday.

The shared currency had earlier been lifted by data showing German industrial orders surging far more than forecast in December, hitting their highest level since April 2008.

Losses against the euro helped the dollar fall around 0.7 per cent against a basket of currencies, extending a more than 1.5 per cent decline over the past two weeks.

The Australian dollar also rose against the greenback, trading at US$0.7811, up 0.8 per cent on the day and edging further away from a six-year trough of US$0.7627 set earlier in the week.

Meanwhile, most emerging Asian currencies softened after China's central bank cut the reserve requirement ratio, the latest key easing move in the region to support growth and combat deflationary pressure.

The Chinese yuan slid after the central bank made a system-wide cut to bank reserve requirements, the first time in more than two years.

South Korea's won fell as foreign investors sold local stocks and bond futures amid risk aversion. Malaysia's ringgit eased as oil prices renewed their slide. The ringgit initially underperformed Asian peers as plunging oil prices renewed concerns over their impact on the country's current account surplus and fiscal deficit. However, it pared some earlier losses as exports in December rose 2.7 per cent from a year earlier. REUTERS