Swiss Central Bank Tries to Bring Down Franc Again
The Swiss central bank on Wednesday took fresh measures to halt the rise of the Swiss franc, which is threatening exports and growth, by increasing liquidity after the currency strengthened to new highs.
"In the light of these developments, the Swiss National Bank is taking additional measures against the strength of the Swiss franc. It will again significantly increase the supply of liquidity to the Swiss franc money market," the central bank said.
On the announcement, the franc eased slightly from 1.0367 earlier to 1.0443 against the euro at 1039 GMT. It also fell slightly against the dollar, from 0.7225 to 0.7259.
The central bank said the franc has risen sharply as investors have put their money into the currency, a traditional safe haven, to escape the turmoil on world markets.
The "substantial rise in risk aversion on the international financial markets has further intensified the overvaluation of the Swiss franc in the last few days," it said.
It noted that the strong franc was a threat to the economy, by crimping exports, and pledged to take further measures if it continued to strengthen.
For now, the central bank was expanding the amount of banks' sight deposits, or cash that can be withdrawn without notice, from 80 billion francs to 120 billion francs.
In addition, it will conduct foreign exchange swap transactions to increase liquidity swiftly.
Last week, the central bank also increased liquidity and cut the already low benchmark lending rate in a bid to make the franc a less attractive investment.
Analysts appeared skeptical that the measures would significantly help to halt the franc's upward trend.
Citibank analysts said that despite the action, the euro and dollar are expected to "stay close to historic lows for now, absent decisive resolution of the fiscal crises on both sides of the Atlantic."
The SNB has a "very difficult task" as the franc is strengthening because investors were looking for alternatives to the dollar and euro, they added.
Several Swiss firms reporting their results in recent weeks have blamed the strong currency for reducing earnings they were repatriating to the country.
Earlier Wednesday, Nestle said its first half sales fell nearly 13 percent to 41 billion francs as the foreign exchange rate had a negative impact of 13.8 percent.
Credit Suisse said in July that the strong Swiss currency took 348 million francs off its second quarter pre-tax income.
The Swiss government is expected to announce new measures soon to dilute the impact of the strong franc on the domestic economy.
Among these measures are plans to tighten anti-cartel rules, so that importers currently benefiting from the strength of the Swiss currency would be forced to pass on their savings to consumers, Swiss newspaper NZZ am Sonntag reported over the weekend.
Source: Agence France Presse
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