Swiss National Bank Takes Further Measures Against Currency

The Swiss National Bank (SNB) announced a further set of measures to halt a surging Swiss franc (CHF) as safe haven buying has driven a substantial rise.  The SNB said it would "significantly increase the supply of liquidity to the Swiss franc money market" and aims to "rapidly expand banks' sight deposits at the SNB from CHF 80 billion to CHF 120 billion.  The SNB will also conduct foreign exchange swap transactions, a measure that was last used in 2008.  The Bank kept the line that it is closely monitoring the market and will take further measures if necessary.

On the currency, the Bank noted: "The substantial rise in risk aversion on the international financial markets has further intensified the overvaluation of the Swiss franc in the last few days. In the light of these developments, the Swiss National Bank (SNB) is taking additional measures against the strength of the Swiss franc."  The SNB also said: "The massive overvaluation of the Swiss franc poses a threat to the development of the economy in Switzerland and has further increased the downside risks to price stability."

At its most recent monetary policy meeting in June this year the Swiss National Bank maintained its main interest rate at 0.25%.  The Bank is forecasting inflation of 0.9% during 2011, while 2012 inflation is expected at 1% and 1.7% in 2013.  The CHF last traded around 0.72 against the USD, with the USDCHF exchange rate briefly touching 0.7190.  The SNB announced a series of moves last week aimed at limiting gains in the CHF.

www.CentralBankNews.info