Franc `Favored Currency' Versus Dollar, Bank of America Says

By Valerie Rota

Oct. 1 (Bloomberg) -- Investors should sell the dollar against the Swiss franc as the slowing U.S. economy raises the odds the Federal Reserve may cut lending rates before the end of this year, Bank of America Corp. said.

``The franc remains our favored currency for exposure versus the dollar,'' wrote Robert Sinche, head of global currency strategy in New York at Bank of America Corp., in a research note. ``Over the last twenty years, reflecting its safe haven status, the franc has consistently appreciated during periods of economic slowdown for the G7 countries.''

Manufacturing in the U.S. contracted in September at the fastest pace since the last recession in 2001, showing the housing slump has spread to other sectors, the Institute for Supply Management said today. Fed fund futures show traders see a 47 percent chance that the Fed will cut its key lending rate to 1.5 percent from 2 percent by December. That compares to a 33 percent probability yesterday.

Bank of America recommends investors sell the U.S. currency and buy the Swiss franc, closing out the trade at a target price of 1.06 francs per dollar.

The franc fell 0.3 percent to 1.1254 per dollar at 4:20 p.m. New York time, compared with 1.1221 yesterday. It weakened 9 percent against the dollar in the past three months.

To contact the reporter on this story: Valerie Rota in Mexico City at vrota1@bloomberg.net