Markets

Swiss franc hits high ahead of SNB rate decision

Published Updated

All 37 economists polled by Reuters from March 3 to 9 expected the SNB to hold its target for the 3-month Swiss franc LIBOR unchanged at 0.25 percent, as inflation remains very low by international standards.

"The SNB remains on the defensive in terms of monetary tightening steps," UBS economist Reto Huenerwadel said in a note, adding the SNB was likely to note economic risks due to the strong franc and global uncertainties in its statement.

Separately on Thursday, the Swiss government, which raised its own growth forecast for 2011 to 2.1 percent from 1.5 percent, said high debt levels in many countries plus the disaster in Japan posed risks to global growth.

The earthquake and nuclear crisis in Japan have prompted investors to flock to the safety of the Swiss franc, and sent it up to an all-time high of 0.8967 per dollar on Thursday.

"Swiss franc flows are due to safe haven over concerns in the Middle east and Japan," Informa Global Markets analyst Tony Nyman said, adding he sees the next downside target for euro/Swiss at 0.8750.

After surging to a fresh all-time high, the franc weakened again somewhat, trading down 0.4 percent at 0.9020 per dollar at 0716 GMT.

The franc was down 0.5 percent against the euro compared to the New York close, trading at 1.2580, off an intra-day high of 1.2479 and not far from the all-time record of 1.2400 hit in late December.

The SNB had been expected to hold rates before the disaster in Japan, but fears it could hit global growth mean the SNB is also likely to strike a note of caution in its outlook.

Given robust Swiss growth and low joblessness, analysts had previously expected the central bank to use the statement to set the stage for rate hikes later this year. The SNB's rate target has been ultra low since March 2009.

Copyright Reuters, 2011