The Swiss may be planning to set a new ceiling on the Swiss franc’s strength versus the euro, say Peter Garnham and Haig Simonian in the Financial Times. The franc fell by 2.6% against the euro on Monday following speculation that the Swiss National Bank (SNB) would move to weaken the currency further. The franc has been in huge demand from investors, who see it as a safe haven from the chaos in the eurozone.
As a result, the SNB intervened in the market in September, saying it wouldn’t tolerate the euro falling below CHF1.20. Threats to buy unlimited amounts of foreign currency have worked so far. As Reuters points out, “reserves data since then have suggested [the SNB] has not had to spend much to defend the level”.
Now, according to the The Wall Street Journal, speculation is rife that it may set a limit of CHF1.30 or higher. Three emergency government meetings have already been held and the SNB has “refused to rule out intervening”. Swiss industrialists, including Nick Hayek, CEO of Swatch, and trade unions, want the government to weaken the franc to aid exports. However, says Eva Szalay in The Wall Street Journal, traders believe the SNB will not “plunge just yet”, particularly with Europe in turmoil, but will aim to “keep the market nervous”.