Swiss Franc as a Safe Haven
In July 2006, the Swiss Franc came back into play as a potential safe haven for hot money in troubled and uncertain times, but no Central Bank wants to see its exchange rate rise too high

Swiss franc reclaiming "safe haven" mantle By Steve Johnson at FT.Com
Published: 13/7/2006

The Swiss franc finally appeared to be reclaiming its tarnished mantle as the ultimate "safe haven" currency on Thursday.
The Swissie has confounded market-watchers this year by resolutely refusing to rise even at times of heightened risk, such as during the sharp falls in equity and commodity prices witnessed in May.
Indeed, as of Wednesday the Swissie was trading 1.3 per cent weaker against the euro and 1.2 per cent lighter against the euro compared to the levels it was trading at on May 10, prior to the market turmoil.
"I have been burned buying the Swiss franc on heightened risk," said David Bloom, currency analyst at HSBC.
But on Thursday the Swissie finally appeared to be living up to its appointed role, albeit in a modest way, as it appreciated 0.2 per cent to SFr1.2321 to the dollar and 0.3 per cent to SFr1.5621 against the euro.
"The world looks very dangerous, with Iraq in the background, the Nigerian pipeline explosion, Israel's invasion into Lebanon and talks between North and South Korea faltering.
"That is a factor that is lifting the Swiss franc," said Marc Chandler, head of global currency research at Brown Brothers Harriman.
Despite this, the forex market largely appeared to escape the sharp moves seen in equity and commodity markets.
The fallout from the carnage in the Middle East was predominantly localised, with the Israeli shekel falling 1.6 per cent to Shk4.508 to the dollar, cementing a two-day slide of 2.9 per cent, and the Lebanese pound slipping just a fraction to L£1,514 to the dollar, within its L£1,500-1,515 trading range following intervention from the central bank.
However a handful of higher-risk emerging market currencies wobbled, with the Turkish lira down 1.9 per cent to TL1.5825 to the dollar and the Hungarian forint 0.9 per cent weaker at Ft280.03 to the euro.
Liquidity was said to be light, with many traders focusing their attention on Friday's Japanese monetary policy decision, with the Bank of Japan poised to raise rates for the first time in six years. By mid-session New York trade, the yen had ticked 0.2 per cent higher to Y115.26 to the dollar.
There was also some speculation on Friday that China may be moving towards another rate hike, having raised rates by 27 basis points to 5.85 per cent in April.
Tony Norfield, global head of FX strategy at ABN Amro, saw the likelihood of higher rates in both Japan and China as positive for Asian currencies in general.
Sterling was in demand, despite the appointment of Andrew Sentance, a business economist broadly seen as dovish, to the monetary policy committee of the Bank of England.
"Andrew Sentance could be more of a dove than a hawk. He was in favour of a rate cut in both March and April," Howard Archer, economist at Global Insight.
Sterling has been earning a bit of a reputation as a high-yielding alternative to the US dollar during times of heightened geopolitical risk, especially for Middle Eastern countries seen as reluctant to become too exposed to the dollar.
However Mr Chandler had a more prosaic explanation for sterling's strength, pointing to a large trade out of euros and into sterling, said to be related to merger and acquisition activity, that passed through the market on Thursday.
The pound rose 0.4 per cent to $1.8404 against the dollar and 0.5 per cent to £0.6886 to the euro.
The Australian dollar ticked up 0.2 per cent to $0.7532 against the greenback after Australia said employment rose by 52,000 in June, against expectations for a rise of just 10,000. The market is now pricing around an 85 per cent probability that the Reserve Bank will raise interest rates by a further quarter point to 5.75 per cent on August 2.

Buy Swiss Francs?
With growing world currency uncertainties, where should the careful investor put his money to keep it safe? There are a number of currencies which could head a shortlist at any given period of time. Switching cash from US dollars or sterling to Euros, Swiss France, Renminbi, or other currency might work, but there is a fundamental problem with any currency speculation or hedge. The country may not want your money. Most Central Banks do not want to see their currency become a safe haven for hot money, as it can have the effect of further strengthening that currency. You may think that the country and its central bank would welcome this, but an artificially (or sometimes realistically) high exchange rate is bad for that countries competitiveness and its ability to trade profitably with the rest of the world.
This argument applies almost exclusively to currencies which are strong enough for you to want to invest in them in the first place, weak currencies with hyper inflation and a history of devaluation and default would welcome your money, but you would not want to buy it!
Some years ago, around 1970 from memory, the Swiss government introduced negative interest rates for newly opened foreign accounts, precisely because they were alarmed at the upward pressure on their exchange rates caused by money seeking a safe haven.

A Good Case for Buying Gold?
It looks to us that many of the predictions forecast in Wake Up are now happening.
Gold is the only currency not managed by a central bank. Nobody wants to stop its exchange rate rising.

Lowest Recent Gold Price

Bull Market?
Does the drop after this price peak mean an end to the gold bull market, we believe not, more of a correction.