Swiss franc tumbles after UBS acquisition of Credit Suisse

Swiss franc fell in European trade against a basket of major rivals, resuming losses after a two-day hiatus against dollar, with the franc reacting negatively to UBS's announced acquisition of Credit Suisse for 3 billion francs. 

Such a deal improved market sentiment and reduced purchases of the franc and yen as safe havens, with the franc also pressured by doubts about raising interest rates by 50 basis points by the National Swiss Bank this week. 

The dollar rose 0.6% against the franc to 0.9312, with a session-low at 0.9245, after rising 0.4% on Friday, the second profit in a row on haven demand amid troubles times for the banking sector. 

Historic Deal

In the largest bank acquisition since 2008, UBS Bank agreed to buy Credit Suisse with Swiss government mediation to contain the confidence crisis developing currently in the global banking sector.

UBS will pay 3 billion francs for Credit Suisse in a complete deal that includes extensive government guarantees.

The price is less than half of Credit Suisse's value at 7.4 billion franks, with the Swiss National Nank supporting UBS with a 100 billion francs of liquidity, while the Swiss government granted guarantees valued at 9 billion franks for potential losses from the assets in the deal.

Swiss Rates

The Swiss National Bank is facing a genuine crisis now and might be forced to hold back its plans to raise interest rates. 

The bank is meeting next Thursday to discuss policies and decide on rates, with now investors expecting only a 0.25% rate hike instead of 0.5%.