The Swiss franc touched its lowest level in two weeks versus the dollar and the euro on Monday after analysts speculated the Swiss National Bank is actively making moves in the financial markets in order to devalue it and on a report that it plans to set a new trading band.
Swiss paper Schweiz am Sonntag revealed on Feb.1 that the SNB plans to set a band of 1.05-1.10 francs per euro, citing unnamed sources privy to the issue. An SNB spokesman refused to comment on the matter. The SNB on Jan. 15 sent markets into a turmoil by eliminating its lid of 1.20 francs per euro, pushing the Swiss franc up at least 40 percent. It is now trading up 13 percent past the cap.
Speculation about the SNB’s intervention gained further credibility after a report showed that bank deposits with the Swiss central bank surged in the week through Jan. 30. The euro jumped 2 percent on Monday’s session to 1.0591 before easing lower to 1.5 percent to 0.9345 francs.
“It is chatter that there is an informal band and the sight deposits data suggests that the SNB is there in the market,” Manuel Oliveri, an FX strategist at Credit Agricole, told Reuters.”The SNB is trying to smooth the flows and the volatility. Also we are seeing that our clients are staying away from this currency because of all the volatility.”
The euro traded up 0.4 percent to $1.1325 after data showed euro zone manufacturing activity rose in January and due to its gains versus the Swiss franc. However, its further rise was hampered by the fact that Greece is yet to convince a reluctant Europe to sign a fresh debt agreement.
Meanwhile, the Swiss purchasing managers’ index plunged to 48.2 last month, indicating the manufacturing industry contracted. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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