Swiss franc hits lowest since 2015 currency cap shock

Reuters




(Adds more comment, background)
    By Jemima Kelly and Saikat ChatterjeeLONDON, July 27 (Reuters) - The Swiss franc hit its weakest
against the euro on Thursday since the Swiss National Bank
removed its cap on the currency in January 2015, as investors
bet the SNB would keep monetary policy loose as other central
banks move towards tightening.
    In an otherwise quiet session for the G10 group of major
currencies in Europe, the franc slipped 0.6 percent to 1.1239
francs per euro <EURCHF=EBS>, its weakest since Jan. 15, 2015,
adding to falls of 1.8 percent against the euro since Monday.
    The SNB has said consistently that the franc is overvalued
since it caved in to years of pressure of capital seeking the
perceived security of Switzerland in early 2015 and allowed the
franc to rise.
    Moves by monetary authorities including the European Central
Bank have triggered expectations that the franc may finally be
able to weaken, providing some relief for battered Swiss
exporters.
    "It is rather euro strength that is driving this,"  said
Antje Praefcke, a strategist with Germany'sCommerzbank, adding
that the SNB may be helping to exacerbate the move, as many in
the market say it has tended to do in recent months.
    "We saw the SNB from time to time intervening when market
moves were in its direction. It might be in the market (now) but
at very low intervention levels, which is good for it as it is
trying to limit the intervention it does," Praefcke said.
    She argued, however, that broad moves in the euro itself
have begun to look increasingly overdone and may see a rebound
soon. Others were less sure.
    "The safe haven trade for the Swiss franc is starting to
unwind," said Michael Hewson, chief markets strategist at CMC
Markets in London.
    "The markets are starting to see some normalisation trades
around the ECB policy (shift) as we head into 2018."
    Thursday's moves also made the franc the biggest loser on
the day against a broadly weaker dollar, falling 1 percent to
0.9597 francs per dollar. <CHF=EBS>.
    "SNB Chairman Jordan this week reiterated that the franc
remains significantly overvalued and that a policy mix
consisting of negative rates and currency intervention remains
in place," Credit Agricole strategists wrote in a morning note
to clients.
    "Considering that the central bank sticks to such a rhetoric
in an environment of more supported ECB monetary policy
expectations and better risk sentiment already implies that the
central bank will continue to do its utmost for reaching levels
closer to fair value," they said.

 (Reporting by Jemima Kelly, Saikat Chatterjee and Patrick
Graham; Editing by Gareth Jones)
 ((jemima.kelly@thomsonreuters.com; +44)(0)(20 7542 7508;
Reuters Messaging: jemima.kelly.thomsonreuters@reuters.net))

Keywords: MARKETS SWISS FRANC/ (UPDATE 1)





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