Swiss squirm as franc soars
Source: Bloomberg News |
August 18, 2011, Thursday
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Print Edition
Print Edition
The Swiss franc strengthened after the country's central bank stopped short of announcing a target rate or temporary peg to the euro in its third attempt in as many weeks to drive down the currency.
The Swiss National Bank will boost liquidity to the money market, expanding banks' sight deposits to 200 billion francs (US$253 billion) from 120 billion francs, it said yesterday. The bank will also continue to buy SNB Bills (bonds) and use foreign exchange swap transactions. The franc surged as much as 2.1 percent against the euro before paring gains and trading at 1.1413 around lunchtime yesterday in Zurich.
Steven Saywell, head of foreign exchange strategy for Europe at BNP Paribas in London, said: "There were strong expectations, maybe too much, in terms of interventions or a peg. We are seeing disappointment. It is going to be very difficult for the SNB to stand in the way of the foreign exchange markets, which will want to push the franc higher."
The franc reached a record high against the euro on August 9, reflecting investor concern that the region's fiscal crisis may continue to worsen. While the SNB trimmed borrowing costs to zero on August 3, the currency continued to appreciate, threatening to erode exports and spark a recession.
Previously, SNB vice-president Thomas Jordan has said policymakers are assessing "a whole range of options," with a temporary currency peg to the euro among the possibilities.
The Swiss National Bank will boost liquidity to the money market, expanding banks' sight deposits to 200 billion francs (US$253 billion) from 120 billion francs, it said yesterday. The bank will also continue to buy SNB Bills (bonds) and use foreign exchange swap transactions. The franc surged as much as 2.1 percent against the euro before paring gains and trading at 1.1413 around lunchtime yesterday in Zurich.
Steven Saywell, head of foreign exchange strategy for Europe at BNP Paribas in London, said: "There were strong expectations, maybe too much, in terms of interventions or a peg. We are seeing disappointment. It is going to be very difficult for the SNB to stand in the way of the foreign exchange markets, which will want to push the franc higher."
The franc reached a record high against the euro on August 9, reflecting investor concern that the region's fiscal crisis may continue to worsen. While the SNB trimmed borrowing costs to zero on August 3, the currency continued to appreciate, threatening to erode exports and spark a recession.
Previously, SNB vice-president Thomas Jordan has said policymakers are assessing "a whole range of options," with a temporary currency peg to the euro among the possibilities.
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