The Swiss Franc made a leap after the rate decision. USD/CHF plunged by about 100 pips to 1.1230 and EUR/CHF also fell by about 100 pips to 1.3780, about 50 pips above the all time low set last week.
The Swiss National Bank (SNB) left the Libor Rate unchanged at 0.25% and while they said they would do “everything” to keep price stability, they said that the economic growth and the demand for Swiss exports – hinting that another intervention in the forex markets is unlikely soon.
In the past, the SNB intervened to keep the EUR/CHF value above 1.50. When this level was breached, the SNB made small interventions to stop it from deteriorating quickly. This was usually done on Friday mornings.
But after the recent European turmoil in May that led to a breach of 1.40, the seemed rather reluctant. The rather-new head of the SNB, Philipp Hildebrand, has taken a slightly different approach than Jean-Pierre Roth, his predecessor.
Switzerland is in an excellent situation, also in football / soccer (stunned Spain), and the central bank now acknowledges it and lets the currency appreciate. It seems that they settle for verbal intervention, and the markets don’t buy their words.
The Swissy’s strength is also due to its renewed status as a safe haven currency. As an island in the middle of the troubled Euro-zone, and with the troubles in Japan, the Swiss Franc is now standing closer to the US dollar in the safe haven club.
Will EUR/CHF reach new record lows? It now depends more on the Euro and especially on Spain.
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