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SNB ready to defend against strong franc

Financial woes in individual European countries also pose significant risks for Switzerland, the head of the Swiss National Bank (SNB) warned on Friday.

But Philipp Hildebrand, chairman of the central bank, said Switzerland maintains enough flexibility in its monetary policy to help counteract the damage a deflating euro could have on an economic rebound.

If the euro loses stability in the wake of Greece’s financial troubles and the downgrading of Portuguese and Spanish debt, investors could flock to the Swiss franc as a “safe haven” currency. That would drive up the franc’s value and make Swiss exports more expensive.

“The SNB will not …allow such a development to turn into a new deflation hazard for Switzerland,” Hildebrand said. “For this reason, it is acting decisively to prevent an excessive appreciation of the franc.”

Markets have assumed the Swiss central bank has been intervening in recent days to keep the franc stable. The SNB has been buying euros in the year's first quarter and up until December had managed to keep the franc’s value above SFr1.50 ($1.38) per euro.

At the close of trading on Thursday, a euro cost SFr1.43. and agencies

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