The franc dropped against all of its most-traded counterparts after Swiss National Bank Vice President Thomas Jordan said a temporary peg to the euro would be legal as policy makers try to stem the currency’s gains. The Swiss currency rallied to records against the euro and dollar earlier this week as Europe’s sovereign-debt crisis and U.S. economic weakness spurred refuge demand. The yen approached its post-World War II high versus the greenback, encouraging speculation Japan may intervene. China’s yuan appreciated beyond 6.4 per dollar for the first time in 17 years. “The SNB is considering all options,” said Lauren Rosborough, a senior strategist at Westpac Banking Corp. in London. “It certainly makes sense that the SNB wants to weaken the Swiss franc in order to stem deflation risks in their economy.” The Swiss franc slid 2 percent to 74.11 centimes versus the dollar at 7:59 a.m. in New York, from 72.66 yesterday. The Swiss currency depreciated 1.6 percent to 1.0460 versus the euro, from 1.0300. The dollar gained 0.1 percent to $1.4161 versus the euro, from $1.4178. The U.S. currency slid 0.4 percent to 76.53 yen, from 76.86, after touching 76.31, compared with the postwar low of 76.25 reached March 17. A temporary franc peg with the euro is within the range of options that policy makers may use to stem the currency’s record-breaking rally, Jordan said in an interview with Tages-Anzeiger today. SNB’s ‘Mandate’ “Any temporary measures to influence the exchange rate are permissible under our mandate as long as these are consistent with long-term price stability,” Jordan said. A Swiss National Bank spokesman, Walter Meier, confirmed the remarks. The U.S. currency weakened for a fifth day against the yen in its longest run of daily declines since June 8. The yen slid for about 10 minutes at 8:20 a.m. London time before renewing its gains. Japanese Finance Minister Yoshihiko Noda said the currency’s movements have continued to be one-sided even after the government intervened on Aug. 4. He was speaking to lawmakers in parliament in Tokyo today. This month’s intervention, in which Japan may have spent a record amount, based on a projection of deposits held by financial institutions at the central bank, was Japan’s third after six years of a hands-off approach that ended in September 2010. Noda said the Aug. 4 action was unilateral. ‘Short-Lived’ “There are enough comments coming out of Japanese officials to indicate that they’re still watching the dollar-yen rate like hawks and are ready to step in,” said Tim Waterer, a currency dealer at CMC Markets in Sydney. “The problem is when they do intervene in the market, the effects are very short-lived because the market is still looking for reasons to unwind riskier positions.” U.S. initial claims for unemployment insurance payments rose with applications for benefits increasing 5,000 in the week ended Aug. 6 to 405,000, the Labor Department is forecast to say today according to a Bloomberg News survey of economists. The Federal Reserve said Aug. 9 that policy makers “discussed the range of policy tools” to strengthen growth and are “prepared to employ these tools as appropriate” while pledging to keep the benchmark interest rate near zero until at least mid-2013. The yuan strengthened 0.4 percent to 6.3937 per dollar in Shanghai, breaching 6.40 for the first time since China unified official and market exchange rates at the end of 1993. The central bank raised its reference rate for the currency by 0.27 percent to 6.3991, the biggest advance since November. China’s Trade Surplus Customs bureau data released yesterday showed record exports helped drive China’s trade surplus to a two-year high in July. Consumer prices climbed 6.5 percent last month from a year earlier, the fastest pace in three years, data showed. “The inflation and trade data, together with the Fed’s policy to maintain extremely low interest rates, have fueled faster appreciation,” said Banny Lam, an economist at CCB International Securities in Hong Kong. “Strong economic growth, supported by the latest export figures, also provides investors with confidence to buy the yuan in these turbulent times.” To contact the reporters on this story: Keith Jenkins in London at kjenkins3@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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