20000328

Firmer Swiss franc, NZ dollar take spotlight

TOKYO: The buoyant Swiss franc and the New Zealand dollar took centre stage in Asian trade on Monday, with the major currency pairs the euro/dollar and the dollar/yen mired in a tight range.

The Swiss franc retained a firm tone after its three percent rise late last week, while the Kiwi dollar rallied after the release by New Zealand early on Monday of robust gross domestic product data for the fourth quarter.

The New Zealand dollar was quoted, compared with $0.4893 before the GDP release and $0.4884 late on Friday.

New Zealand's growth surged 2.2 percent in October-December from the previous quarter, an annual growth rate of 5.8 percent. Economists surveyed by Reuters had forecast, on average, that GDP would grow 1.1 percent from the previous quarter and 3.0 percent on an annualised basis.

The Swiss franc stood to the dollar. It had climbed to a near six-month high of 1.6220 in New York on Friday from around 1.6700, the level seen before the Swiss National Bank caught the market by surprise last on Thursday with a bigger-than-expected 75 basis point interest rate hike.

"There is talk that some overseas fund operators are continuing to unwind Swiss franc carry trades and possibly switching to yen carry trades," said a dealer at a Japanese commercial bank.

In a carry trade, leveraged operators borrow funds in a country with low interest rates to invest in higher-yielding currencies.

Since the SNB raised its target range for the three-month Swiss franc London interbank offered rate (LIBOR) to between 2.5 and 3.5 percent from 1.75 to 2.75 percent, the Swiss franc has lost its shine as a carry trade vehicle, dealers said.

The New Zealand dollar extended gains in the afternoon after rating agency Standard & Poor's affirmed its long-term double-'A'-plus foreign currency issuer and senior unsecured credit ratings on New Zealand following the GDP release.

Chew Ping, associate director of sovereign rating at S&P, said its affirmation removed any imminent downgrading pressure, but the outlook remained negative on concerns over the New Zealand government's budget policies.-Reuters