BS; Swiss Franc Gains Versus Euro as Minister Opposes Intervention
Jan. 17 (Bloomberg) -- The Swiss franc strengthened against the euro for the first day in six after a report that the nation’s finance minister opposes central bank policy makers intervening to weaken the currency.
Switzerland’s Eveline Widmer-Schlumpf is opposed to the Swiss National Bank resuming efforts to prevent the franc from appreciating further, the SonntagsZeitung newspaper reported yesterday. The central bank remains “able to act,” SNB Vice President Thomas Jordan said in an interview with Tages- Anzeiger, also published yesterday. The franc weakened versus the dollar and the pound.
“If the market thinks intervention is less likely, then the franc should strengthen against the euro,” said Steven Barrow, head of research for Group of 10 currencies at Standard Bank Plc in London. “Intervention is very costly and at least one official is now suggesting it’s not on the radar screen, which for the franc is positive news.”
The franc strengthened 0.5 percent to 1.2836 per euro as of 11:04 a.m. in London. It was 0.3 percent weaker versus the dollar at 96.60 centimes and fell 0.4 percent to 1.5358 per pound.
Jordan said on Jan. 14 that the franc’s strength poses an “extraordinary challenge” to some exporters, though he refused to say whether policy makers were planning a renewed round of foreign-currency purchases to weaken the franc. The SNB spent more than a year intervening in currency markets to weaken the franc to head off deflation risks before abandoning the policy in June.
Record SNB Loss
The central bank expects to post a record loss of 21 billion Swiss francs for 2010 after the euro’s slump eroded the value of currency reserves accumulated in an attempt to stem gains in the franc. That’s about 4 percent of the size of the economy.
The estimated loss doesn’t limit their ability to counter deflation threats if necessary, Jordan told Tages-Anzeiger.
“We still have a very robust balance sheet and remain able to act,” Jordan said in the Zurich-based newspaper. “Should there be a renewed threat of deflation, the SNB would take all measures necessary to guarantee price stability.”
--Editors: Matthew Brown, Mark McCord
To contact the reporter on this story: Garth Theunissen in London gtheunissen@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
