World Crisis Online

The Swiss franc advanced on Thursday as escalating concerns over unrest in the Middle East boosted haven demand for the currency.

Fresh tensions between Israel and Iran added to worries over continuing anti-government protests in the region.

The Swiss franc climbed 0.3 per cent to SFr0.9562 against the dollar, rose 0.3 per cent to SFr1.2977 against the euro and edged 0.1 per cent higher to SFr1.5420 against the pound.

Michael Derks at FxPro said the tense situation in the Middle East and north Africa had delivered a mixed bag of consequences for the Swiss franc over recent weeks.

On the one hand, he said, Switzerland was extremely quick to freeze the assets of the recently deposed leaders of Tunisia and Egypt after their recent fall from grace, consistent with recent moves by the country’s authorities to impound the possessions of key individuals and leaders in the region.

“On the other hand, there is a real risk of a eruption of tensions in the Middle East given the political vacuum that now exists in Egypt,” said Mr Derks.

“The smart money seems to be leaning towards the latter over recent days.”

Analysts said that the Swiss franc, rather than the dollar, appeared to be investors’ first port of call amid rising tensions.

“These moves to safety are very different from the 2008 financial-crisis safe-haven stories, when financial institutions were caught short of dollar liquidity,” said Alan Ruskin at Deutsche Bank.

Traders said the Swiss franc was also benefiting from comments from Philipp Hildebrand, president of the Swiss National Bank, who appeared unconcerned over the strength of the currency.

Mr Hildebrand said that with inflation moving higher, interest rates could not remain at ultra-low rates forever and would have to normalise.

He added that there was no miracle solution to rein in Swiss franc strength and that it could help in containing inflationary pressures.

Meanwhile, the dollar was little changed at $1.3572 against the euro, flat at Y83.59 against the yen and down 0.2 per cent at $1.6133 against sterling.

Elsewhere, it was a rare day of losses for Scandinavian currencies, which have been in heavy in demand in recent months.

The Swedish krona fell 0.4 per cent to SKr8.7405 against the euro, pulling back from a 10-year high against the single currency, after inflation data came in weaker than expected.

The Norwegian krone dropped 0.3 per cent to NKr7.7935 against the euro after below-forecast fourth-quarter growth figures.