SNB Has Ammunition to Defend Franc Cap, Raiffeisen Schweiz Says
Nov. 28 (Bloomberg) — Speculation the Swiss franc will strengthen through its 1.20-per-euro cap is misplaced as the nation’s central bank has the tools to defend it, according to Raiffeisen Schweiz.
The franc this month drew closer to its limit than at any time in the past two years, before a Nov. 30 referendum on the Swiss National Bank’s gold holdings. Should the vote pass, the central bank will have to increase its holdings of the precious metal to 20 percent of reserves, which may restrict policy makers’ ability to defend the cap. Sight deposits at the SNB rose last week, signaling officials may have sold the franc to maintain the cap for the first time since September 2012.
“In the short term they still have the full firepower to defend the cap,” Alexander Koch, an economist at Raiffeisen Schweiz in Zurich, said in an interview on Bloomberg Television’s “On The Move” with Francine Lacqua. “Only a re- emergence of the euro debt crisis and a sustained jump in risk aversion which triggers also safe-haven flows would be a danger for the cap.”
Raiffeisen Schweiz has 3.7 million customers and a 17 percent share of Switzerland’s mortgage market, according to information on it website.
The Swiss currency strengthened to 1.2009 per euro on Nov. 19, within 0.1 percent of the limit. It was little changed at 1.20155 at 2:01 p.m. London time.
According to a poll by gfs.bern, 38 percent are in favor of the proposal, 47 percent are against it, with 15 percent of voters still undecided. The poll of 1,412 was conducted Nov. 7-15, and had margin of error of 2.7 percentage points.
“If the Swiss voted in favor of this measure it would be seen as something of a shocker come Monday morning when the gold market and currency markets open,” Jon Cox, head of Swiss equities at Kepler Cheuvreux in Zurich, said on Bloomberg TV. “No doubt you will see upward pressure on the Swiss franc” if the measure is passed, he said.
To contact the reporters on this story: Lucy Meakin in London at lmeakin1@bloomberg.net; Eshe Nelson in London at enelson32@bloomberg.net To contact the editors responsible for this story: Paul Dobson at pdobson2@bloomberg.net Keith Jenkins
