SNB to Intervene in the Currency Market

The Swiss National Bank (SNB) will enforce its minimum rate of 1.2 Swiss francs per euro and is ready to buy unlimited amounts of foreign currency in any global interbank market, said interim president Thomas Jordan on Tuesday.

The SNB introduced the 1.2 francs-per-euro cap in September to stem the Swiss currency appreciation in an effort to relieve the pressure on the country’s exporters and prevent the risk of deflation.

However, even at the current rate the franc is still very strong, which is harming export profitability, and firms are suffering from compressed margins. This may force some companies to move production abroad, Mr. Jordan said.

According to Mr. Jordan, this move has helped to some extent to facilitate planning for export-oriented companies, and to reduce the risk of both deflation and severe structural damage to the Swiss economy.

When commenting on the growth outlook, Mr. Jordan said that gross domestic product will slow “considerably” this year and there is “absolutely no risk of inflation in Switzerland” even after the SNB cut its key interest rate to near zero and improved market liquidity.

Source: Wall Street Journal

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Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.