SNB Says Franc’s Decline Has Reduced ‘Significant Overvaluation’

The Swiss National Bank tweaked its formal view of the franc’s level, saying that the currency’s decline against the euro is helping curb its “significant overvaluation.”

“Since the last monetary policy assessment, the Swiss franc has weakened against the euro and appreciated against the dollar,” the central bank said in a statement on Thursday. “Overall, this development is helping to reduce, to some extent, the significant overvaluation of the currency. The Swiss franc nevertheless remains highly valued, and the situation on the foreign exchange market is still fragile.”

The change evolves the label “significantly overvalued” that has featured in the SNB’s verbal repertoire since early 2015, when it put into force a policy of negative rates and interventions.

“For us, it’s not yet a sign that a monetary policy switch lies in store, since they said the foreign currency market situation remains fragile,” said Alessandro Bee, an economist at UBS Group AG in Zurich. “They’d want to see the weaker franc become sustainable before they adjust monetary policy.”

The central bank kept its deposit rate at a record low of minus 0.75 percent, as forecast by all economists in a Bloomberg survey. It also reiterated its pledge to buy foreign currencies.

An abatement of risk aversion and better economic momentum in the single currency area have caused the franc to drop more than 6 percent against the euro this year. It dropped to 1.15380 per euro in early August — a level not seen since the SNB scrapped its 1.20-per-euro currency ceiling — playing into the hands of the central bank, which has been trying to stem its rise for years. The franc was down 0.2 percent at 1.14859 per euro at 10 a.m. in Zurich.

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