Vodafone Sale Weakens Swiss Currency
LONDON -(Dow Jones)- The Swiss franc came under pressure in the currency markets early Tuesday after Swisscom announced it will repurchase a 25% stake in Swisscom Mobile from the UK's Vodafone Group for CHF4.35 billion.
Traders said that to complete the transaction Swisscom needed to sell francs to buy sterling. However, because there is little business in the currency pair, it would have to sell francs and buy euros, then sell euros to buy sterling.
Though the sums involved are small by currency market standards, such transactions would tend to weaken the franc and strengthen the pound. They would also have a psychological impact on business as a whole.
In the event, however, the franc had recovered its poise by midday. The euro was up a tad to 1.6018 francs from 1.6013 late Monday but the dollar was down to 1.2166 francs from 1.2226.
The pound remained firm, rising to $1.9635 from $1.9479. The euro eased to 0.6708 pounds from 0.6727. Sterling was also quoted at 2.3888 francs, up from 2.3811.
Sterling has been a major beneficiary of merger and acquisition flows this year, with data compiled by Deutsche Bank showing net inflows for the year up to the end of last week totaled $90.4 billion.
Swisscom initially sold its stake to Vodafone in 2001, but has decided to make the repurchase in order to refortify its home position.
-By Nicholas Hastings, Dow Jones Newswires; 44 20 7842 9493; nick.hastings@dowjones.com
(END) Dow Jones Newswires "
Posted to the site on 19th December 2006