Benzinga Daily Forex Overview: ECB To Discontinue Swiss Franc Forex Swaps

The Swiss National Bank (SNB), the European Central Bank (ECB), the Narodowy Bank Polski (NBP) and the National Bank of Hungary (NBH) have announced this morning that they will discontinue EUR/CHF foreign exchange swaps, whereby Swiss francs are provided against euros, with a term of seven days.

"Demand for liquidity provided by this type of operation has declined, and conditions in the Swiss franc funding market have improved," the banks have said.

Therefore, similar to the other three central banks, the NBH will conduct the last one-week EUR/CHF swap operation on 25 January 2010. Source

Meanwhile, Hungary's OTP has bounced back after forex crisis. Before the credit crisis OTP was a star of central Europe, being the largest commercial bank in Hungary and the biggest still in local (non-state) hands among the new EU member states in the region.

But in October 2008 Hungary suffered a foreign exchange crisis and was forced to turn to an International Monetary Fund-led consortium for €20bn ($29bn) stand-by credit.

For banks, the weakening of the forint threatened to make foreign currency-denominated loans unaffordable, while contracting export markets foretold a grim cycle of corporate insolvency and rising unemployment. Source

The euro hit a four-month low against a broadly firmer pound on Monday, under pressure in subdued trade with U.S. markets closed for a holiday. Concerns over Greece's ballooning fiscal deficit weighed on the single currency and the market will watch for comments from euro zone finance ministers meeting on Monday.

"The Greek government has lost all fiscal credibility with the market," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ. "We are also seeing some risk aversion on slowing growth momentum in developed economies such as Germany." Source

The dollar and yen dipped in subdued Asian trade on Monday, giving up earlier gains as investors hesitated to trade actively with the New York market closed for a holiday.

The dollar and yen had risen earlier in the session as currencies leveraged to global growth, such as the Australian dollar, were hit by profit-taking after quarterly results from JPMorgan Chase & Co (NYSE:JPM) sent equity markets lower.