Bloomberg News

SNB Maintains 1.20 per Euro Limit for Franc: Analysts’ Comments

December 15, 2011

Dec. 15 (Bloomberg) -- Analysts comment on Switzerland’s central bank decision to leave its limit on the franc unchanged, resisting pressure from exporters to further curb the strength of the currency.

The Swiss National Bank, led by Philipp Hildebrand, today kept the franc’s minimum exchange rate at the 1.20 per euro limit it set Sept. 6, in line with the estimates of nine out of 13 economists surveyed by Bloomberg.

The comments were made in client notes today:

Tim Davis, a currency strategist at Morgan Stanley in London:

“The SNB may be slightly less concerned about the strength of the franc than previously. Hence, following this statement, we would assign a markedly lower probability that the SNB raises the floor above the 1.20 level, that is unless this level was to be tested. We expect euro-Swiss to trade heavily through the day and expect the floor to hold in the short term. However, we continue to believe that the floor will be tested next year if sentiment surrounding the eurozone deteriorates further.”

Adam Cole, head of global currency strategy at RBC Europe Ltd. in London:

“The SNB maintained the euro-Swiss floor, disappointing those that had expected a rise (ourselves included) on the back of recent softer-than-expected inflation data. Although Chairman Hildebrand said the SNB stands ready to take further action ‘at any time,’ other aspects of the statement suggest further significant ‘news’ is required to provoke a move.

‘‘While Hildebrand’s comments leave open the possibility of an intra-meeting move (the next meeting is March 15), the hurdle appears to be quite high, with CPI required to be sufficiently weak to suggest ‘temporary’ deflation is turning into something more malignant.’’

Simon Smith, chief economist at foreign-exchange broker FXPro Group Ltd. in London:

‘‘The outlook for the eurozone has deteriorated and the political backdrop has also weighed on the single currency into the year-end. This will likely mean that the SNB could be doing more work to defend the 1.20 level on euro-Swiss, let alone thinking about moving it to 1.25 or beyond. But this will have to happen next year if Switzerland is to avoid a more entrenched period of deflation.’’

Peter Rosenstreich, chief currency analyst at Swissquote Bank SA in Geneva:

‘‘The statement went pretty much as expected with concern expressed over the pace of slower growth and the decline in inflation. The central banks obviously highlighted the escalation in the European credit crisis. For us this was the key reason the SNB did not adjust the euro-Swiss floor’’ higher.

‘‘We suspect that the knee-jerk reaction in euro-Swiss will be short lived as most believe that the SNB will repeg in the first quarter of 2012. The SNB credibility remains intact and they reiterated their commitment to the ‘floor’ by being prepared to buy foreign exchange in unlimited quantities.’’

--Editors: Mark McCord, Matthew Brown

To contact the reporter on this story: David Goodman in London at

To contact the editor responsible for this story: Daniel Tilles at

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