Swiss Franc Down As SNB Maintain Rates, Stick To EUR/CHF Cap

Swiss Franc Down As SNB Maintain Rates, Stick To EUR/CHF Cap


The Swiss franc traded lower against its major opponents in early European deals on Thursday after the Swiss National Bank decided to leave the cap on the franc exchange rate intact and the key interest rate unchanged near zero, as widely expected.
The minimum exchange rate was maintained at CHF 1.20 per euro. The bank reaffirmed that it will continue to enforce this ceiling with 'utmost determination'.
The target range for the three-month Libor rate was kept at 0.0-0.25 percent. If necessary, it will take further measures at any time, SNB added.
According to the central bank, the Swiss franc is still overvalued and is weighing on economic activity. As such, the bank said it will not permit an appreciation of the Swiss franc, given the serious impact this would have on both prices and economic performance.
The franc declined to a 2-day low of 82.75 against the yen, compared to yesterday's close of 83.09. The next support level for the franc-yen pair is seen at 82.00.
Against the euro and the pound, the franc reversed its direction and touched a 6-day low of 1.2134 and a 2-day low of 1.5144, respectively. If the franc declines further, it may target 1.216 against the euro and 1.52 against the pound. At Wednesday's close, the euro-franc and the pound-franc pairs were worth 1.2092 and 1.5100, respectively.
Euro area policymakers should act effectively to contain renewed intensification of financial market tensions as it has the potential to disrupt the balance of risks for both growth and inflation, according to the latest monthly bulletin released by the European Central Bank.
The September ECB staff macroeconomic projections for the euro area foresee annual real GDP growth in a range between -0.6 percent and -0.2 percent for 2012 and between -0.4 percent and 1.4 percent for 2013. Compared with the June Eurosystem staff macroeconomic projections, the ranges for 2012 and 2013 have been revised downwards.
The franc declined to 0.9394 against the U.S. dollar, after climbing as high as 0.9357 around 2:20 am ET. On the downside, the franc may target 0.94 level. The pair finished yesterday's deals at 0.9375.
The U.S. weekly jobless claims for the week ended September 8 and PPI for August are expected in the early American session.
At 12:30 pm ET, FOMC rate decision is due. The Fed is expected to maintain interest rates at 0.25 percent.