Swiss franc's rise on defensive appeal looks well underpinned

Brexit fears and US rate-rise speculation have pushed the defensive-play Swiss franc to heady heights against sterling, the euro and dollar in June, but the currency still looks well underpinned going forward.

At 14:07 BST, sterling was down 0.61% to 1.3861 francs, the euro was down 0.3% to 1.08822 francs, and the dollar was off 0.19% to 0.9628 francs.

Since 1 June, sterling has fallen 2.7% against the Swiss unit, with the dollar off 2.6% over the same period and the euro tumbling a comparatively more moderate 1.6%.

This flight to Swiss safety has been spawned by investor jitters over whether Britain will quit the European Union as a result of its in-out referendum on 23 June.

On the other side of the Atlantic, traders have been gripped by speculation -- in turn hawkish and then dovish -- on whether the US Federal Reserve will hike interest rates in mid June.

"It is likely that demand for safe haven assets will remain firm and that the CHF will remain well underpinned," said Rabobank Financial Markets Research in a research note.

Rabobank added that it expected UK to remain within the EU, but also that there were significant risks to this view. Either way, the franc would perform well, it said.

"On a Brexit (where UK quits the EU), we would expect EUR/CHF to fall hard back towards the 1.05 (francs) level initially. On a clear Remain vote EUR/CHF should be able to drift back towards 1.10," it said.

The franc's safe-haven appeal was hard to beat -- Switzerland was running a healthy current-account surplus and a budget deficit that was close to being balanced.

"That said, for a long time safe haven demand for the CHF has been the thorn in the side of both the Swiss National Bank and the Swiss economy," Rabobank argued.