Switzerland’s franc strengthened the most in two weeks versus the euro after data showed deflationary pressures in the nation are easing, reducing the need for the central bank to boost monetary stimulus.
The franc also climbed versus all but one of its 31 major peers after producer and import prices fell in June by the smallest amount in three months. The Swiss National Bank has cut interest rates and intervened in currency markets in recent months to curb the franc’s appreciation and turn around the sharpest slide in consumer prices in the developed world.
“For the market, it’s important that the deflationary dynamics are running out of steam,” said Esther Reichelt, a currency strategist at Commerzbank AG in Frankfurt. “Hence the SNB won’t be forced to look for new ways to ease its monetary policy. We don’t think that the SNB can enforce further rate cuts.”
The franc strengthened 0.4 percent to 1.0417 per euro as of 11:29 a.m. London time and advanced 0.6 percent to 94.47 centimes to the dollar.
Switzerland’s franc also rose 0.7 percent against a basket of Group-of-10 currencies tracked by Bloomberg Correlation Weighted Indexes, after being the best performer over the past six months with a 14 percent gain.
This strength is an issue for Swiss policy makers. Wednesday marks six months to the day since the SNB was forced to abandon efforts to defend a 1.20-per-euro cap on the franc’s value. A strong currency can hurt the economy by forcing down prices and damping growth.
Switzerland’s producer and import prices fell 0.1 perent last month, following a 0.8 percent drop in May. Prices fell, or remained static, in every month in the past year except March.