Switzerland’s central bank should lock in the franc’s decline against the euro by adjusting its exchange-rate cap to ease pressure on employment, labor union Unia said.
“In recent days the Swiss franc has somewhat weakened against the euro and today reached a rate of 1.25 francs” versus the single currency, Unia said in a statement today. The Swiss National Bank should “immediately set this rate as the new lower limit and to defend it at all costs,” the union said.
The franc depreciated to 1.2569 per euro today, the weakest level since May 2011, before strengthening 0.3 percent to 1.2437 per euro at 1:51 p.m. London time. The SNB introduced its currency cap of 1.20 francs per euro in September 2011 to help exporters and fend off the threat of deflation.
“There’s been a lot of talk about euro-Swiss this morning because it went through 1.25,” said Christian Lawrence, a London-based currency strategist at Rabobank International. “That’s going to remain in focus. A lot of people are talking about the possibility of the Swiss using this opportunity to raise the floor to 1.25. It’s just talk at the moment.”
Unia said the SNB should set a goal of weakening the franc to 1.40 per euro to protect jobs.
“Hundreds of businesses still are suffering because of the overvalued franc, especially in tourism and in the export industry,” it said. “If the situation isn’t rapidly fixed now, there is the danger of another wave of job cuts.”
Silvia Oppliger, a spokeswoman for the SNB in Zurich, declined to comment on the currency cap when reached by phone today.
The franc is set for its biggest weekly decline since Sept. 9, 2011, when the SNB imposed the cap to block the currency’s appreciation, as easing financial-market tension in the euro area reduces demand for Swiss assets as a haven. It weakened 0.1 percent to 93.37 centimes per dollar today.
“There’s an overall improvement in markets,” said Kasper Kirkegaard, a currency strategist at Danske Bank A/S in Copenhagen. “There’s a lot of money parked in Switzerland as an insurance, and that can have a big effect as it flows out.”
The decline of the franc also will benefit earnings of Swiss companies that have substantial euro-area sales, Jon Cox, an analyst at Kepler Capital Markets in Zurich, wrote in a research report. Nestle AG, the world’s largest food company, clothes retailer Charles Voegele Holding AG and chocolate maker Lindt & Spruengli AG stand to benefit, he wrote.