August 12, 2011 / 8:35 AM / 6 years ago

FOREX-Euro slips on debt concerns, Swiss franc choppy

 * Euro down vs dollar on downgrade and banking sector
 * Volatile swings seen in Swiss franc, keeps investors edgy
 * Talk of dollar/yen option barriers at Y76.25, Y76.00

 (Recasts, adds quote, changes dateline PVS SYDNEY/SINGAPORE)	
 By Anirban Nag	
 LONDON, Aug 12 (Reuters) - The euro fell on Friday, dragged
down by persistent worries about core euro zone debt and as a
short selling ban by four European countries failed to lift
investor confidence in the region's banking sector.	
 The safe-haven Swiss franc was choppy, after posting record
one-day falls against the euro and dollar on Thursday when
rebounding stock markets and verbal interventions by the Swiss
central bank weighed on the currency. Traders remained edgy on
Friday on growing expectations that the Swiss National Bank
(SNB) could step up its fight to curb the franc's strength.	
 Investors were also wary of pushing the yen much higher,
given expectations that Japanese authorities could intervene to
check the currency's gains.	
 "There is no end in sight to the euro zone debt crisis and
the U.S. slowdown, both of which are negative for risk and
should support the Swiss franc," said Gavin Friend, currency
analyst at nabCapital.	
 "But there is something brewing on the Swiss side of things
and if the SNB can manage to crimp demand for Swiss francs by
pushing down yields and instigate even more negative yields,
then we could see the euro rebounding fast to 1.15 francs."	
 European shares were volatile on Friday as a short-selling
ban on financial shares by France, Italy, Spain and Belgium,
announced late on Thursday, failed to shore up the sector. In
the past few sessions, the euro has been hurt by falling stocks
and as investors stepped up selling in shares of large French
banks on worries about their exposure to peripheral euro zone
 The euro was down 0.3 percent against the dollar at $1.4198
 , but firm against the Swiss franc at 1.0844
francs, having fallen to a session low of 1.06853 earlier.	
Euro/Swiss, which hit a record low of 1.0075 on Tuesday, has
lost more than 13 percent since the start of the year.	
 Much of the previous day's slide in the Swiss franc was
sparked by a Swiss newspaper report, which quoted SNB Vice
Chairman Thomas Jordan as saying the central bank could ease
monetary policy further. He also declined to rule out the
possibility of pegging the franc to the euro. 	
 There was scepticism about the idea of pegging the franc to
the euro , and analysts said the franc was likely to
stay supported as long as worries about a global slowdown and
debt problems in the United States and euro zone persisted.	
 "If they were to introduce a peg, there would rightly be
some questions as to their commitment to defending it, because
it wouldn't be a structural decision to align their economy with
Europe," said Todd Elmer, currency strategist at Citi in
 "You run the risk of the SNB facing a lot of pressure from
the market, which means they might have to sell a quite large
amount of Swiss (francs) to defend it and it's not clear that
there is the appetite among Swiss authorities to do so," he
 The dollar was up 0.7 percent against the franc at 0.7677
 , off a record low of 0.70676 struck on Tuesday.	
 The yen was pinned near a record high against the dollar
despite recent intervention by Japan to weaken it.  	
 The dollar was down 0.3 percent against the yen at 76.61 yen
 , near an all-time low of 76.25 yen set in mid-March.	
 There has been talk of option barriers at 76.25 yen and
76.00 yen. That suggests that dollar buying by options players
could emerge near such levels and cushion the dollar's fall, but
it also means the dollar's drop could gain steam if such
barriers are breached.	
 Given the dollar's recent drop to close to its record low
against the yen, jitters and speculation about the potential for
Japanese yen-selling intervention have been high. 	
 In a sign of such market sentiment, traders have cited
heightened demand recently for short-dated dollar call options
with strike prices roughly around 78 yen to 79 yen.	
 Japanese Finance Minister Yoshihiko Noda said on Friday he
will consider various options if one-sided moves in the yen
 Commodity-linked currencies like the Australian
and New Zealand dollars stayed under pressure with investors
wary of adding positions given worries about global growth. The
Aussie was down 0.6 percent at $1.00284 while the New Zealand
dollar shed 1.1 percent to trade at $0.8218.    	
 (Additional reporting by Masayuki Kitano in Singapore and Ian
Chua in Sydney; Editing by Susan Fenton)	

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