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  • Writer's pictureanalysiswatch

Title: Euro snaps recent run of losses, Swiss franc rallies on inflation surge

Jun 02, 2022 04:15AM ET

By: AnalysisWatch

The euro and yen rose Thursday, reversing recent losses against the US dollar, while the Swiss franc hit a one-month high against the euro after Swiss inflation rose to its highest level in 14 years.

By 0745 GMT, the dollar was down 0.3% against a basket of rivals, while the euro rose 0.4% to $1.0689 after two days of losses.

The yen reversed initial weakness and was trading at 129.87 yen per dollar, slightly higher than today.

However, this week's record inflation figure in the euro zone increases pressure on the European Central Bank, which meets next week for an economic policy meeting, to take action to curb price increases even if it means weakening the slowing economy.

The Swiss franc rose 0.3% to 1.022 francs per euro, its highest monthly level, after Swiss prices rose to their highest level in 14 years in May.

The 2.9% figure may seem modest compared to levels of more than 8% in the Eurozone and the UK, but it is striking in a country known for its historically low inflation and will put further pressure on the Swiss National Bank to address rising prices.

The franc broke parity with the euro in March, with investors betting that an extremely cautious SNB would be forced to tighten policy and be less willing to counter a strengthening franc.

Against the dollar, the franc strengthened 0.5% to 0.9576, its highest point in two days.

Despite Thursday's decline, many analysts still believe the U.S. dollar will gain strength if economic data supports further increases in interest rates on U.S. Treasuries.

Contributing to the overnight rise in the U.S. currency was the yield on the 10-year U.S. Treasury note, which hit a two-week high of 2.951% on Wednesday, after figures showed that U.S. manufacturing activity rose in May and demand for goods remained strong.

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