Tags: swiss | francs | currency | greece

Swiss Sell Francs to Stabilize Currency After Greek Flare-Up

Monday, 29 Jun 2015 01:07 PM

Swiss National Bank President Thomas Jordan said the central bank intervened to stabilize the franc, which surged after Greek Prime Minister Alexis Tsipras called a referendum on bailout terms.

“Yesterday and overnight there was an increased demand for francs,” Jordan told a conference of Swiss executives in Bern on Monday. “The euro was under selling pressure and the SNB intervened in the market.”

Tsipras’s decision to call what is effectively a public vote on Greece’s euro-area membership is also a blow for Switzerland, where the currency’s appreciation is pushing the economy toward a recession. The franc jumped to its highest level in almost four weeks against the euro on Monday after talks on a new Greek bailout collapsed, tipping the country ever closer to financial collapse.

The franc is the best-performing major currency this year, with its appeal as a haven overriding the negative interest rates introduced by the SNB and the possibility of more intervention.

It appreciated 0.4 percent to 1.0386 per euro as of 9:02 a.m. London after earlier jumping 1.1 percent to 1.0315, the strongest level since June 2. It has surged 16 percent against the euro since Dec. 31. Gains accelerated after the SNB abandoned its exchange-rate cap of 1.20 in January.

‘No Predictions’

While the SNB has repeatedly said that it would intervene in the market if necessary, Monday’s comments are the first time since January that a Swiss policy maker has admitted to action. Jordan declined to say whether more interventions would be necessary.

“I make no predictions here,” he said. “We’re following the situation. It’s quite possible that things calm down after this development and I think the markets will now watch exactly what’s happening in Greece, what’s happening with this referendum, what are the options for new negotiations.”

Switzerland is a popular destination for investors in times of market stress. With the Greek tensions persisting, the currency has risen to levels that Jordan described this month as “markedly” overvalued. That strength has put the country on the brink of its first recession in six years, while consumer prices have dropped on an annual basis for the past seven months.

“Even without Greece, there should be pressure on euro- Swiss to the downside and this is just an additional burden,” said Thu Lan Nguyen, a currency strategist at Commerzbank AG in Frankfurt. “We are back to square one.”

While Swiss Finance Minister Eveline Widmer-Schlumpf told the same conference in Bern that the situation is manageable for the SNB, options trading signals more strength is possible. The premium on six-month options to buy the franc versus the euro over those that give the right to sell at more than three percentage points at the end of last week, the most among 25 peers.


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Swiss National Bank President Thomas Jordan said the central bank intervened to stabilize the franc, which surged after Greek Prime Minister Alexis Tsipras called a referendum on bailout terms.
swiss, francs, currency, greece
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2015-07-29
Monday, 29 Jun 2015 01:07 PM
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