The Swiss National Bank announced this morning that it is expanding existing measures to stem the Swiss franc strength. The central bank will increase liquidity by expanding bank sight deposits and that it would take further measures against the currency’s strength if necessary.
Dramatically reduced liquidity in August due to summer holidays, coupled with sovereign debt concerns in the eurozone, have combined to strengthen the Swiss franc to record highs.
The SNB said it would expand banks sight deposits to 200 billion francs from 120 billion francs. To achieve the new target level the SNB said it would repurchase outstanding SNB Bills and employ foreign exchange swaps.
The bank has already cut interest rates to zero and last week said it would use forex swaps to accelerate the increase in Swiss franc liquidity.
“The measures taken thus far by the Swiss National Bank (SNB) against the strength of the Swiss franc are having an impact. Nevertheless, the Swiss franc remains massively overvalued,” the SNB said in a statement.
The Swiss Cabinet will be meeting later today and plan to unveil a 1.5 billion Swiss franc (1.16 billion pound) package to help the country deal with the strong currency.
Ironically, the Swiss franc strengthened further this morning and USDCHF fell to 0.7823 from 0.8014 while EURCHF fell to 1.1219 from 1.1545.