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(Bloomberg) -- The surge in the Swiss franc that inflicted losses on banks and wiped out some currency traders has divided the biggest foreign-exchange dealers over its future direction against the euro.

The franc will strengthen about 9 percent to 92.50 centimes per euro by March, says JPMorgan Chase & Co., which is among the five largest currency dealers, according to Greenwich Associates. While the New York-based bank estimates the Swiss currency will be stronger than current levels at year-end, UBS Group AG says the franc will weaken as stimulus measures by the European Central Bank start to heal the euro area’s economy.

The conflicting views are a sign of the instability created by the Swiss National Bank’s decision to stop the sales of francs it had used to protect a cap on the currency’s strength at 1.20 per euro. The price swings triggered by that Jan. 15 decision have increased implied volatility on the franc by the most of 46 currencies tracked by Bloomberg since Dec. 31.

“With the floor now gone, the clear danger is of an undershoot in euro/franc versus its sustainable equilibrium value, which we put close to 1.10,” said Paul Meggyesi, a foreign-exchange strategist at JPMorgan in London. The gains will be driven by an “accelerated unwinding of non-resident funding in francs,” he said.

JPMorgan, along with Commerzbank AG, sees the franc at 98 centimes per euro by the end of 2015. UBS says the currency will weaken as it’s the most overvalued that it has been in the past 30 years. Bank of Tokyo-Mitsubishi UFJ Ltd. said Switzerland’s negative interest rates limit the scope for the currency to strengthen.

Franc Losses

The Swiss National Bank’s announcement that ended a three- year policy of keeping the franc weaker than 1.20 per euro caught traders and investors globally off guard. It pushed the franc as much as 41 percent stronger versus the euro, the biggest gain on record.

Citigroup Inc., Deutsche Bank AG and Barclays Plc were said to have lost cumulatively $400 million from the SNB’s decision. Marko Dimitrijevic, chief investment officer at Everest Capital, was said to be closing his largest hedge fund, which had about $830 million at the end of 2014, after it lost nearly all its money on the franc’s move.

Further gains in the franc may be limited because of its extreme valuation, Beat Siegenthaler, a currency strategist at UBS in Zurich, wrote in a client report on Jan. 18. Switzerland’s biggest bank forecasts the franc will weaken to 1.05 per euro in 12 months’ time from 1.0111 per euro at 12:23 p.m. London time.

As well as removing the cap, the SNB said it will push the interest rates on sight deposits to minus 0.75 percent from minus 0.25 percent to discourage capital inflows.

“When the dust settles, speculative short-franc positions may slowly build again,” said Derek Halpenny, European head of global market research at Bank of Tokyo-Mitsubishi. “The deepest negative interest rate in the world, the threat of intervention and a possible period of recession should all work against the franc.”

To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net To contact the editors responsible for this story: Paul Dobson at pdobson2@bloomberg.net Todd White

Bloomberg