The Swiss franc, a currency that has provided refuge for investors since the escalation of the euro zone debt crisis, may be the next safe haven to fall, according to a new report from Societe Generale.
The bank forecasts the Swiss franc could weaken by almost 10 percent against the euro by mid-2014 to 1.35, as systemic risk in the single currency bloc recedes. One euro currently buys 1.229 Swiss francs.
“Systemic risk has faded in the euro zone, and further progress will be made to tackle the solvency issues of euro zone countries, the Swiss franc should lose its appeal as an alternative investment,” the bank said.
Further cooperation among European leaders, including fast tracking a banking union, for example, and an improvement in the region’s growth prospects would be negative for the currency, it noted.
Recent economic indicators including the latest euro zone Purchasing Manager’s Index (PMI) – which rose to a near two-year high in July – suggest a possible turning point for the euro area.
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Mingze Wu
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