SNB May Have Sold Francs This Week as Cap Comes Under PressureLucy Meakin
A decline in Switzerland’s franc against the euro, even as the 18-nation common currency plunged versus other major peers, fueled speculation the Swiss National Bank may be buying euros and selling francs to defend its cap.
The Swiss currency touched a one-week low today as Governing Board Member Fritz Zurbruegg said the SNB won’t hesitate to enact supplementary measures to protect the 1.20 franc-per-euro level.
The central bank introduced its cap more than three years ago to aid exporters as investors sought the relative safety of the franc at the height of the euro area’s sovereign-debt crisis. Now, the SNB is back under pressure as record-low interest rates and unprecedented asset purchases by the European Central Bank are helping to fuel a fresh wave of euro weakness. President Mario Draghi said today the ECB will broaden its asset-purchase program if needed to boost inflation.
“I don’t know for a fact, but by looking at the price movements I think people are inferring that perhaps they are” intervening in the currency market, said Jane Foley, senior foreign-exchange strategist at Rabobank International in London. “With the ECB policy and Draghi’s comments pushing that euro lower, then intervention potentially become far more likely. There’s almost inevitability there.”
The franc was little changed at 1.20179 per euro as of 1:43 p.m. London time after reaching 1.20329, the weakest since Nov. 12. It has appreciated 2 percent versus the common currency this year. The euro slid 0.9 percent to $1.2422 today.
SNB spokesman Werner Abegg declined to comment on the speculation of purchases.