For the first time in seven months, traders are testing the Swiss National Bank’s determination to limit the franc’s strength against the euro as Europe’s resurgent debt crisis drives up demand for safer assets.
Foreign-exchange strategists have ceased cutting forecasts for the euro as European government officials intensify efforts to end the region’s crisis and traders pare bets for a collapse in the currency.
In the last two years there has been no better place for foreign-exchange investors than in nations whose economies are tied to commodities. Now the rally has left those currencies at least 9.5 percent overvalued based on the relative costs of goods and services as measured by the Organization for Economic Cooperation and Development.
Traders are losing confidence in Group of 20 finance officials’ pledge to avoid foreign-exchange manipulation, less than a week after the leaders vowed to stop devaluing currencies to prop up their economies.