The Swiss franc fell the most in two weeks against the euro on speculation the Swiss National Bank will move their FX target from above 1.20 to above 1.25 to help protect exports.
Big Swiss companies such as Nestlé SA have had their exports suffer in the economic slowdown.
On September 6, 2011, the Swiss National Bank introduced a peg to the euro in an effort to curb franc appreciation. The Swiss central bank said it’s ready to take “further measures” if needed to stem gains in the franc as it left its benchmark interest rate at zero to ward off the threat of a recession. The bank said it will buy “unlimited quantities” of foreign currencies including the euro to stop the franc from strengthening.
For a third day today, the Swiss franc fell against the US Dollar and depreciated versus all but one of its 16 major peers. Swiss central bank spokesman Walter Meier in Zurich declined to comment when asked about speculation that policy makers may adjust the franc ceiling. The franc slid as much as 1.1 percent versus the euro, recording the largest intraday decline since the September 6 intervention.
SNB has been successful in limiting Swiss franc gains to 1.20 without having to flood the system too much with francs. But some say that moving the target to as high as 1.25 so early in the ‘game’ could prove to be counterproductive since the existing floor has not yet built up sufficient credibility.