Zero Rates Push Traders to Cash-Rich Swiss Franc, Yen

[Joanne98]

Jan. 20 (Bloomberg) -- At a time when interest-rates are sinking toward zero around the world, the biggest currency traders are recommending countries that have the largest trade surpluses, led by Japan, Norway and Switzerland.

BNP Paribas SA, the best currency forecaster in a 2007 Bloomberg survey, says the yen will strengthen about 14 percent against the dollar by June. Goldman Sachs Group Inc. made Norway’s krone one of its top 2009 picks, with possible gains of 17 percent versus the dollar. Bank of America Corp., the largest U.S. lender by assets, says the Swiss franc will advance against every major currency.

The global economic crisis that forced central banks from the U.S. to New Zealand to cut interest rates last year also reduced earnings from so-called carry trades by about half, according to data compiled by Bloomberg. Currencies of countries with trade surpluses are perceived as safer because governments don’t have to brave credit markets in a year when sovereign bond sales are likely to exceed $3 trillion.

“The tide has turned,” said Jens Nordvig, a senior currency strategist in New York at Goldman Sachs. “Surplus currencies such as the franc and the yen are likely to perform well, while the deficit countries are pretty vulnerable.”

Yen Gains

Switzerland’s current-account surplus was 8 percent of gross domestic product last year, while Japan’s was 3.8 percent and Norway’s 16 percent, according to the Organization for Economic Cooperation and Development. That compares with deficits of 4.9 percent of GDP in the U.S., 5.1 percent in Australia and 9.5 percent in New Zealand.

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