SNB Maintains Rates at Zero, Franc Strengthens

The Swiss franc rose today even after the Swiss National Bank left the benchmark interest rate at zero at pledged to maintain the peg of the nation’s currency to the euro.



The central bank wrote in the monetary policy assessment:

The Swiss National Bank will enforce the minimum exchange rate of CHF 1.20 per euro set on 6 September with the utmost determination. It is prepared to buy foreign currency in unlimited quantities. It continues to aim for a three-month Libor at zero and will maintain total sight deposits at the SNB at significantly above CHF 200 billion.

The SNB set the ceiling to the franc at 1.20 per euro on September 6 and the Swiss currency weakened considerably since. But the Swissie started to rise last week and the monetary policy decision of the SNB hasn’t deterred the currency. The central bank predicted that the economic growth may stall in the second half of this year. The inflation forecast for the third quarter of 2011 was cut from 1.4 percent to 0.4 percent.

USD/CHF fell from 0.8758 to 0.8706 as of 23:02 GMT today and touched the low of 0.8653 intraday. CHF/JPY climbed from 87.46 to 88.72 before trading at 88.10.

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