Swiss Franc Drops to Weakest Since SNB Removed Cap Against Euro

Switzerland’s franc fell to its weakest level since the central bank unexpectedly removed its exchange-rate ceiling in January.

It dropped for a fifth day against Europe’s shared currency and slipped against 12 of its 16 major peers as Greece edged closer to securing a final agreement on a rescue program. The Swiss National Bank removed its 1.20 francs-per-euro floor after the prospect of Europe’s quantitative-easing program made defending the limit too expensive.

The franc is “highly overvalued and has been since it was allowed to appreciate back in January,” said Neil Mellor, a currency strategist at the Bank of New York Mellon Corp. “It’s not conducive to the health of the Swiss economy, far from it, and it leaves Switzerland vulnerable to a shock.”

The franc weakened 0.5 percent to 1.0829 per euro as of 4:37 p.m. London time, after touching 1.0841, the weakest level since Jan. 15. It dropped 0.2 percent to 98.60 centimes to the dollar.

Since the removal of the euro limit, the SNB has relied on negative interest rates and market intervention to stem the franc’s gains. Officials confirmed they intervened on June 29 as the currency jumped after Greece announced plans to hold a referendum on Europe’s austerity demands.

Now, Greece is seeking to conclude talks on a rescue program by Tuesday, leaving enough time for national parliaments to assess the deal so funds can be disbursed for an Aug. 20 payment to the ECB. That’s taking off some of the pressure.

“Euro-Swiss was heavily positioned for a Greek collapse and endless ECB QE,” said Peter Rosenstreich, head of market strategy at Swissquote Bank SA near Geneva. “But with the Greek situation postponed for eight to 12 months, traders are focused on positive.”

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