Confidence in the US dollar will remain firm in the short term with further market
buying...

... interest. The franc will, however, gain some support from the greater
speculation over a domestic tightening. Any sustained increase in risk aversion
would also offer strong support to the Swiss franc. Overall, the dollar should
retain a firm tone initially, but is likely to hit near-term resistance close to
1.2750 against the franc.

The dollar pushed to a high of 1.2715 against the Swiss franc during Thursday as the
dollar strengthened generally and the franc was unable to hold gains against the
Euro. The US currency remained generally strong in early Europe on Friday with a
move to 1.2765 before a retreat to 1.2735.

The Swiss currency secured some brief advantage from strong retail sales data with a
3.2% June increase and there will be some further speculation over a monetary
tightening in September. The franc will still struggle to secure strong buying
interest on domestic grounds given the yield disadvantage.

Levels of risk aversion will need to be watched closely in the short term with some
evidence that investors are becoming more risk averse due in part to fears over the
impact of high oil prices. If there is a sustained increase in risk aversion, the
Swiss currency will be in a position to strengthen, possibly sharply.


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