By Klaus Wille and Lukanyo Mnyanda Dec. 18 (Bloomberg) -- The Swiss franc strengthened beyond 1.50 per euro for the first time since March, when the nation’s central bank began selling the currency to weaken it. The franc climbed as much 0.7 percent to 1.4909 against the euro, before trading at 1.4991 as of 12:48 p.m. in Zurich. It appreciated as much as 0.6 percent yesterday to 1.5008 per euro. Nicolas Haymoz, a Swiss National Bank spokesman in Zurich, said “we don’t comment on movements in the Swiss franc.” The SNB’s failure to act yesterday “gave the idea to the market that maybe the SNB doesn’t care anymore,” said Lutz Karpowitz, a currency strategist in Frankfurt at Commerzbank AG, Germany’s second-biggest lender. “It would be a risky game to bet on more franc strength. If they stopped intervening, that would bring the euro-franc to levels they cannot accept.” Against the dollar, the Swiss currency appreciated 0.5 percent to 1.0424. The SNB began selling the franc in March in an effort to ward off deflation and combat the economic slump. Central bank President Jean-Pierre Roth, who steps down at the end of December, said on Nov. 24 that central banks may “soon” start withdrawing unconventional measures as the global economic recovery gathers pace. He didn’t specifically refer to Switzerland. Policy makers changed their language on currency purchases at last week’s quarterly monetary policy assessment, saying that the bank will act to counter “any excessive” moves by the franc against the euro. At its previous assessment in September, the bank said it would “continue to act decisively to prevent any appreciation.” Economic Growth Switzerland’s economy returned to growth in the third quarter after a yearlong contraction, led by a surge in company spending and a revival in exports. The nation suffered the shallowest recession among the Group of 10 industrialized nations, as measured by Bloomberg data. Its performance lagged behind only Australia, the sole G- 10 member to avoid recession. The Swiss economy is forecast to shrink less than half as much as the euro region this year, 1.9 percent compared with 4 percent, the Organization for Economic Cooperation and Development said Nov. 19. Still, “there’re no signs the economy has improved enough to keep the SNB from stepping in,” said Yoshihiro Nomura, foreign-exchange team manager at Trust & Custody Services Bank Ltd. in Tokyo. “But if investors have already taken positions in anticipation of intervention, the bank may skip doing so this time because the impact would be limited.” Franc Sales The SNB sold the franc in March to counter a 7.6 percent advance against the euro in the previous six months, making imported products less expensive and increasing the threat of deflation, or a general decline in consumer prices. “They will lose credibility if they don’t step in,” said Geoffrey Yu, a currency strategist at UBS AG in London. “The market will test them.” The Swiss central bank has never said at which level it would intervene. The franc weakened on Nov. 26 as the SNB sold the currency, traders said, after reaching the strongest level in five months against the euro and climbing to parity with the dollar for the first time in 19 months the day before. To contact the reporters on this story: Klaus Wille in Zurich at kwille@bloomberg.net; Lukanyo Mnyanda in London at lmnyanda@bloomberg.net

Source