Forexpros – The U.S. dollar hit a 15-month high against the Swiss franc on Wednesday, after a poorly received auction of Italian government bonds fuelled fears that the debt crisis in the euro zone is deepening, pushing investors towards the safety of the greenback.
USD/CHF hit 0.9660 during European morning trade, the pair’s highest since February 16 2011; the pair subsequently consolidated at 0.9653, gaining 0.50%.
The pair was likely to find support at 0.9558, Tuesday’s low and resistance at 0.9775, the high of February 11 2011.
Italy’s Treasury auctioned EUR5.73 billion of 5 and10-year bonds in an auction which met with lackluster investor demand, while borrowing costs rose sharply, indicating that concerns over Spain and uncertainty over the outcome of elections in Greece next month are having a negative impact on Italy.
Investor sentiment has weakened amid concerns over the situation in Spain, where rising bond yields, the growing costs of bank rescues and a recession hit economy have fuelled fears that Madrid will be forced to seek an international bailout.
The yield on Spanish 10-year bonds climbed to 6.6% earlier Wednesday, approaching the critical 7% threshold that preceded bailouts in Greece, Ireland and Portugal.
In Switzerland, the KOF Institute said earlier that its economic barometer rose to 0.81 in May from 0.43 the previous month, marking the fourth consecutive month of improvement, indicating that the rate of economic growth is gaining momentum.
The Swissie was almost unchanged against the euro, with EUR/CHF dipping 0.01% to hit 1.2010.
Later Wednesday, European Central Bank President Mario Draghi was to speak, while the U.S. was to release a report on pending home sales.
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