SNB May Keep Franc-Euro Near Cap, Deutsche Bank Says

(Corrects third paragraph to remove reference to franc breaching the cap a second time.)

The Swiss central bank’s “passive” defense of its 1.20 limit on the franc’s rate against the euro may spur traders to end bets the currency will weaken, according to Deutsche Bank AG.

“The method of intervention has been passive, rather than active, with the Swiss National Bank not pushing euro-Swiss franc aggressively higher,” George Saravelos, a currency strategist in London, wrote in a note to clients yesterday.

The franc traded at 1.20261 per euro at 6:26 a.m. London time. It appreciated to 1.19995 on April 5, penetrating the SNB’s exchange-rate limit for the first time since the cap was set on Sept. 6. SNB interim chief Thomas Jordan told reporters two days ago that the central bank is prepared to buy foreign currency in unlimited quantities to enforce the policy.

“This passive method goes in contrast to a potentially more activist approach” and “may result in an unwinding of some of the large speculative longs in euro-Swiss franc,” Saravelos wrote, referring to bets the euro will rise against the franc. “An unwind of the speculative long may mean ranges become even tighter, with euro-Swiss franc staying very close to the floor.”

The franc has traded between 1.21989 and 1.19995 this year, according to data compiled by Bloomberg. Since the day after the cap was implemented, it has fallen to as weak as 1.24736, which occurred on Oct. 19.

“The SNB usually prevents euro-Swiss franc slipping below the 1.20 mark with the help of unlimited buying orders at this level,” Lutz Karpowitz, a senior currency strategist at Commerzbank AG in Frankfurt, wrote in an investor report two days ago.

To contact the reporter on this story: Paul Dobson in London at

To contact the editor responsible for this story: Daniel Tilles at

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