Currency speculators are still betting that a three-year old Swiss franc currency cap will be breached, despite polls showing that a vote to require the Swiss National Bank to load up on gold will fail.
That is because even if the Nov. 30 gold initiative is voted down, the risk that the European Central Bank could resort to asset purchases and drive the euro lower is still giving speculators courage to put on bets favouring a stronger franc.
The referendum, if passed, would force the SNB to hold 20 percent of its reserves in gold, making it harder defend the cap by impeding its flexibility to conduct policy.
Partly as a result, the franc has risen to a 26-month high against the euro of 1.2009 per euro, bringing it close the SNB’s of 1.20 francs per euro, imposed to protect Switzerland from having to live with an overvalued currency.
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