(Updates with comment from analyst starting in fifth paragraph.)
Oct. 19 (Bloomberg) -- The Swiss National Bank may change its franc ceiling from 1.20 versus the euro as the currency weakens, foreign-exchange broker FXPro Group Ltd. said.
“The closer we get to 1.25 on the euro-franc, the more realistic it is that the SNB will choose to move the goalposts,” Simon Smith, chief economist at FXPro in London, said in an e-mailed note today. “Just how much the SNB has been involved in the recent weakening is difficult to know, but a combination of fear and position adjustment could well do the SNB’s job for it and so we shouldn’t be that surprised to see the cap shifted on a move above 1.25.”
The Swiss central bank, led by Philipp Hildebrand, imposed a cap on the franc on Sept. 6 to protect the recovery and stop investors from piling into the currency. With the economy showing increasing signs of slowdown and companies struggling to maintain sales growth, some labor unions have called on policy makers to change the ceiling to 1.40 per euro.
The Swiss currency, which is traditionally perceived as a haven in times of global turmoil, traded at 1.2432 versus the euro at 1:11 p.m. in Zurich, down 0.6 percent on the day. It reached a record 1.0075 on Aug. 9.
Still, Peter Rosenstreich, chief currency analyst at Swissquote Bank SA in Geneva, said he doesn’t expect the SNB to raise its ceiling anytime soon, citing the risk that renewed turmoil in markets could push investors back to the Swiss currency. European leaders will hold a summit on Oct. 23 in Brussels to discuss ways to tackle the region’s debt crisis.
“The primary reason is that protecting a higher floor in euro-franc could become increasingly difficult and there are still significant risk events which could generate a rush into the franc,” Rosenstreich wrote in a note today. “With its balance sheet slowly getting larger and dark clouds lingering over Europe, we don’t expect the SNB to risk its credibility.”
--Editors: Fergal O’Brien, Eddie Buckle
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