Thursday, 14 June 2012 10:44
ZURICH: The Swiss franc inched up against the dollar and hovered against the euro on Thursday as markets waited to see whether the Swiss National Bank would announce steps in addition to its cap against the euro to tame the strong currency.
The SNB is expected to reassert its commitment to hold down the cap on the franc of 1.20 per euro, which it set last September after investors fleeing the euro zone almost pushed the unit to parity against the single currency.
The policy review comes just three days ahead of a cliffhanger Greek election, which could see the debt-laden country being forced out of the euro zone. Such a move could trigger a barrage of safe-haven flows into the franc, severely testing the limit.
"A shift in the EUR/CHF floor looks unlikely but the recent upward pressure on CHF could pale into insignificance compared to any upward pressure following a Greek Euro exit," said Mitul Kotecha, head of global foreign exchange strategy at Credit Agricole.
A ratcheting up of the euro zone crisis in recent weeks has already forced the SNB to step up its interventions leading to a sharp rise in its foreign currency reserves in May.
Investors will be on alert for any mention of possible additional measures, such as capital control or a charge on sight deposits, which it could implement to try and dent the attraction of the franc.
Recent economic data has underscored the central bank's concern about deflation. Swiss producer and import prices fell in May, dragged down by the strong franc, while consumer prices also dropped more than expected.
All Economists in a Reuters poll expect the bank to leave its target band for the Swiss franc LIBOR at 0 to 0.25 percent and keep it close to zero until the end of 2013.
The franc rose 0.1 percent against the dollar to trade at 0.9544 by 0721 GMT compared to the New York close.
The franc was steady against the euro at 1.2013.
Copyright Reuters, 2012