BLBG: Swiss Franc Falls for Second Day as SNB Says It May Intervene
The Swiss franc dropped for a second day against the euro after Swiss National Bank Vice President Philipp Hildebrand pledged to sell “unlimited” amounts of currency to curb its appreciation.
The central bank may intervene in foreign-exchange markets after the global financial crisis sent investors flocking to currencies perceived as havens, sending the franc 6 percent higher versus the euro since October. The franc slipped to a two-week low versus the 16-nation currency today as gains in equity markets around the world eroded its appeal as a refuge.
“First we had Hildebrand’s comments and then equity sentiment also improved,” said Henrik Gullberg, a currency strategist in London at Deutsche Bank AG, the world’s biggest foreign-exchange trader. “That’s a double negative for the franc.”
The currency weakened 0.3 percent to 1.5065 per euro by 11:22 a.m. in Zurich and 0.2 percent to 1.1556 per dollar. It also fell versus 12 of the 16 major currencies monitored by Bloomberg.
“With short-term rates of practically zero, the SNB can’t prevent a further appreciation in the franc through a rate cut,” Hildebrand said in a speech in St. Gallen, Switzerland late yesterday. “The SNB is able to sell unlimited francs versus another currency. In an extreme case, it can commit itself at the same time to buying unlimited currencies at a fixed-exchange rate.”
Stock markets in Europe and Asia rallied, with the MSCI World Index advancing 0.9 percent.
The franc pared its declines after an index of investor and analyst expectations for Switzerland’s economy in the next six months improved. The ZEW Center for European Economic Research and Credit Suisse Group said sentiment rose to minus 66.7 in January, from minus 76.2 in December. The index fell to a record low of minus 91.1 in October.
