Bloomberg News

Franc Reaches One-Month Low Against Euro Amid SNB Speculation

December 07, 2011

Dec. 7 (Bloomberg) -- The Swiss franc reached a one-month low against the euro after a lawmaker said a government panel is considering using negative interest rates to combat the currency’s appreciation.

The franc declined versus 14 of its 16 major counterparts after Finance Minister Eveline Widmer-Schlumpf said negative interest rates and capital controls “are issues which are being examined” by a committee looking at ways to counter the currency’s strength. The statement added to speculation the Swiss National Bank will adjust the franc’s cap at 1.20 per euro at its policy meeting on Dec. 15.

“The market is nervous ahead of next week’s SNB meeting with speculation growing that it may raise the franc floor based on both lower growth and the inflation outlook,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “Comments over negative rates or other capital control measures are reinforcing near-term franc bearishness.”

The franc dropped 0.1 percent to 1.2417 per euro at 11:57 a.m. in London after falling to 1.24438, the weakest since Nov. 8. The currency declined 0.2 percent to 92.80 centimes per dollar, and fell 0.2 percent to 83.78 yen.

The Swiss currency slid as a much as 0.7 percent against the euro on Dec. 1 after the government said it was willing to “examine the feasibility of supporting measures,” including negative interest rates, to aid the SNB in its defense of the Swiss currency’s ceiling.

Reports in the past two weeks showing a slide in consumer prices and third-quarter growth that was the slowest in more than two years has fueled speculation the SNB will act to curb the franc next week. Unemployment held at 3 percent in November, the State Secretariat for Economic Affairs said today, the lowest since January 2009.

The franc has weakened 5 percent in the past six months, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.

--Editors: Nicholas Reynolds, Peter Branton

To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net


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