In This Article:
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Swiss-centric crisis sees Swiss franc lose favour
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Investors shelter elsewhere, boosting gold, yen, bonds
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Swissie risk concentrated in Swiss economy - analyst
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Swiss franc's days as investment refuge are not over
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But currency is not an 'all-weather' haven - strategist
By Samuel Indyk
LONDON, March 24 (Reuters) - The Swiss franc hasn't lived up to its safe-haven reputation during the Credit Suisse collapse, as investors have sought shelter elsewhere, bringing more of a boost to the value of the gold in Switzerland's bullion vaults than to its currency.
Money managers ditched the Swiss franc at the fastest rate in two years last week in the run-up to the dramatic takeover of Credit Suisse by UBS.
The Swissie, often used as a refuge in times of market stress or volatility, lost 0.9% against the dollar in the week after the Swiss finance department said regulators were closely monitoring the situation at Credit Suisse on March 13.
In that same time, Japan's yen, which is also seen as a refuge in times of tumult, rose 2.6% against the dollar .
Gold, another traditional safe haven, rose over 5% in the week after March 13 to above $2,000 an ounce, its highest in over a year, while government bonds saw some of their biggest inflows in decades.
"It definitely is to do with developments in the banking sector," said Kirstine Kundby-Nielsen, FX analyst at Danske Bank, on why the franc wasn't stronger.
"You still have some of the safe-haven hedging properties in the Swiss franc but it can only take so much when the risk ends up being so concentrated in the Swiss economy and the Swiss financial sector," Kundby-Nielsen added.
Speculators added over $800 million to their bearish positions on the Swiss franc in the week to March 21, according to data from the Commodities Futures Trading Commission, the most in one week since early March 2021.
On Sunday, the Swiss National Bank (SNB) orchestrated a $3 billion deal for UBS to buy rival Credit Suisse, backed by a massive guarantee of up to $260 billion, a third of the country's national output, in state and central bank support.
"If it hadn't been Credit Suisse, but any other European bank getting into trouble, you would have seen the Swiss franc rising sharply because it would have been the safe haven for European risk," said Francesco Pesole, FX strategist at ING.
Research from the SNB in 2016 found that in previous crises, flows into Switzerland and the franc were driven by weaknesses elsewhere.
Futures data shows speculators poured money into bullish bets on the Swissie after the dot-com bubble burst in early 2000, after the 9/11 attacks in 2001, and again in 2008 and 2011-2012, during the euro zone debt crisis and once more during the COVID crisis.