Franc's Crawl Toward SNB Cap Sees It Weaken Beyond 1.10 Per Euro

The Swiss franc weakened through 1.10 per euro for the first time since the central bank abandoned its currency cap in January as demand for havens diminished amid signs of stabilization in global markets.

The currency dropped against most of its 16 major peers on Friday even as stocks slid across Europe. The Swiss National Bank, which has been battling falling consumer prices and economic output, is scheduled to announce its monetary-policy stance on Sept. 17, the same day the Federal Reserve concludes a meeting that may result in the first U.S. interest-rate increase since 2006. Swiss interest rates are currently negative.

“Markets are becoming a little bit more risk tolerant, and that is driving most of the majors at the moment,” said Adam Cole, the London-based head of global foreign-exchange strategy at Royal Bank of Canada. “As to whether it continues: Yes, ultimately we think it does. It’s still extremely over-valued and longer term it will continue to fall.”

The franc depreciated 0.5 percent to 1.10334 per euro at 4:53 p.m. London time, taking its decline this week to 1.8 percent, the most since the period ended Jan. 30. It reached 1.10398, the weakest since the 1.20 cap was removed on Jan. 15.

Switzerland’s currency will decline toward 1.20 per euro, though it may take 18 months to two years before getting there, said RBC’s Cole.

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