Swiss Franc Weakens on Speculation SNB Sold Currency to Curb Appreciation
The Swiss franc weakened against the euro amid speculation the nation’s central bank sold the currency to curb its appreciation.
The franc depreciated to about 1.3900 per euro, before strengthening to 1.3806 as of 5:03 p.m. in London. Werner Abegg, a spokesman for the Swiss National Bank, declined to comment. The franc earlier appreciated to a record.
“It could be intervention or a large order,” said Marcus Hettinger, a foreign-exchange strategist at Credit Suisse Group AG in Zurich. “We have now strengthened considerably and the message from the SNB is still that they will prevent excessive appreciation, so it’s possible they will come into the market.”
The franc climbed to a record 1.3746 per euro after Switzerland’s Federal Statistics Office said foreign-currency reserves jumped to 232.4 billion Swiss francs ($202 billion) in May, from 153.6 billion francs in April.
“Swiss reserves exploded last month,” Christian Lawrence, a foreign-exchange strategist at Royal Bank of Canada in London, said today in an investor note. It calls “into question how long the Swiss National Bank can keep this up.”
UBS AG said it ended a recommendation to buy the franc versus the euro after the Swiss currency reached the bank’s forecast of 1.38.
Switzerland’s central bank started selling francs in March 2009 to ward off deflation and revive the economy. Pressure on the currency to appreciate has increased as the euro tumbled this year amid concern the region’s sovereign-debt crisis may lead to the collapse of the shared currency.
“It looks as if the SNB has intervened,” said Ursina Kubli, a foreign-currency analyst at Bank Sarasin & Cie in Zurich. “The franc has displayed pretty strong gains over the last days.”
Swiss consumer prices rose 1.1 percent in May from a year earlier, the statistics office said today. That was less than the 1.2 percent median forecast of 14 economists in a Bloomberg News survey.
“CPI was disappointing,” Geoffrey Yu, a strategist at UBS in London, wrote today in a report. “Should the SNB recognize these figures as deflation risks returning, interventions may yet return in force. Fundamentally euro-franc could drop further, but heavy positioning and the exigent threat of SNB interventions suggests a more cautious approach.”