SNB signals readiness to intervene to curb franc strength

The Swiss franc fell on Tuesday below levels not seen since the country’s central bank removed its cap on the currency, with traders speculating that the bank was intervening to weaken the currency.

The Swiss National Bank is ready to intervene in the foreign currency market to ease monetary policy after ditching its cap on the Swiss franc earlier this month, its vice-chairman said in an interview on Tuesday. There was talk of an informal cap on the franc’s exchange rate against the euro at around parity, with many traders still recovering from a 40 percent surge in the franc on Jan. 15 when the Swiss National Bank suddenly removed the three-year-old cap of 1.20 francs per euro.

The SNB declined to comment but vice-chairman Jean-Pierre Danthine said in an interview published on Tuesday the bank was ready to intervene. Data suggests the central bank might have been buying euros to weaken the franc ever since it ditched the cap.

The franc fell nearly 2 percent to 1.03845 francs per euro, before recovering to trade at 1.01780 by 1220 GMT, still down 0.2 percent The franc shed nearly 3 percent on Monday.

Switzerland’s central bank shocked financial markets by abandoning its three-year-old cap on the franc against the euro on Jan. 15, a policy it later said would have cost 100 billion Swiss francs ($110.84 billion) to defend this month alone had it been maintained.

The euro has been recovering from an 11-year trough of $1.1098 hit on Monday after it became clear that Greece had voted in a new anti-bailout government.

Nevertheless, the broad direction for the euro remains to the downside, given that the European Central Bank has launched a 1 trillion-euro government bond buying programme that will run until September 2016.

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