Sept. 30 (Bloomberg) -- The Swiss franc fell the most in three months against the euro amid speculation the central bank sold the currency to curb its advance.

The franc dropped as much as 0.8 percent versus the 16- nation currency, the biggest slide since June 24. Nicolas Haymoz, a Zurich-based spokesman for the SNB, declined to comment on the decline when contacted by Bloomberg News today. Swiss National Bank Governing Board member Thomas Jordan said last week policy makers will act “with full force” to avoid an appreciation of the franc against the euro.

“Price action and market talk suggests the SNB has intervened today to sell the Swiss franc,” Marc Chandler, New- York based global head of currency strategy at Brown Brothers Harriman & Co., wrote in an e-mail today. “It appears it may be buying dollars and euros. Swiss banks have been rumored to be the featured agents, which fits into the intervention story.”

The franc was down 0.4 percent at 1.5180 per euro as of 6:02 p.m. in Zurich and traded as low as 1.5240. Earlier, it was as strong as 1.5080 per euro, before sliding 0.6 percent to 1.5176 within the next 30 seconds.

The declines came as the European Central Bank agreed to lend financial institutions 75.2 billion euros ($110 billion) at the current benchmark interest rate of 1 percent today. On June 24, when the ECB lent a record 442 billion euros to banks, the franc fell as much as 2.4 percent against the euro.

‘Currency Swings’

“It is possible that investors in need of franc liquidity have been borrowing from the ECB for a preferential rate and using the proceeds to sell euro-Swiss,” Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut, wrote in a report Sept. 28. “The SNB will need to enter the market to offset any currency swings.”

The last time the franc weakened amid speculation the SNB intervened in foreign-exchange markets was on Sept. 10, when it dropped as much as 0.3 percent to 1.5201 per euro, before ending the day at 1.5143.

The SNB started selling the franc on March 12 to prevent it from appreciating. Since March 11, it has fallen more than 2.5 percent against the euro, having risen more than 7 percent in the previous six months.

By holding back the Swiss franc, policy makers are trying to prevent deflation from worsening the steepest recession since 1992 and restore investor confidence. The benchmark Swiss Market Index of stocks, up almost 14 percent since Dec. 31, is the developed world’s worst performer this year after falling a combined 37 percent in 2007 and 2008.

Franc Appreciation

SNB Chairman Jean-Pierre Roth said on June 18 that the nation’s central bankers “fear deflation” and “if we want to fight against deflation we have to stop a further appreciation of the franc.”

Consumer prices declined in August for a sixth month, dropping 0.8 percent from a year earlier, the Federal Statistics Office said Sept. 4. During a prolonged period of falling prices, consumers may postpone purchases, causing economic activity to shrink.

Gross domestic product contracted 0.3 percent in the second quarter, the fourth consecutive quarterly drop. The Swiss government predicts growth will contract 1.7 percent this year.

To contact the reporters on this story: Gavin Finch in London at gfinch@bloomberg.net; Anna Rascouet in London at arascouet@bloomberg.net

Last Updated: September 30, 2009 12:17 EDT