Swiss Franc Advances As SNB Keeps Currency Ceiling, Interest Rate On Hold

05:07, 18th September 2014

(RTTNews) - The Swiss franc climbed against its key counterparts in early European deals on Thursday, after the Swiss National Bank decided to keep its currency ceiling and interest rate unchanged, while signaling its willingness to take further measures immediately when needed.

The central bank maintained the minimum exchange rate of CHF 1.20 per euro and left the target range for the three-month Libor unchanged at 0.0-0.25 percent.

As the interest rate is close to zero, the currency ceiling remains the key instrument to avoid an undesirable tightening of monetary conditions. The bank will therefore continue to enforce the minimum exchange rate with utmost determination, it said.

The bank reiterated that it is prepared to purchase foreign currency in unlimited quantities. If necessary, it will take further measures immediately, SNB said.

The franc has seen sharp appreciation against the euro since early June, after the European Central Bank slashed its key interest rates and introduced additional stimulus measures to rejuvenate the euro area economy. Conflicts in Ukraine and the Middle East also aided to the franc's strength.

Expectations about the SNB introducing negative rates to stem the franc's rally were intensified, after it touched a 21-month high on September 4, when the ECB stepped up further easing.

The franc appreciated to 1.2064 against the euro, its highest since September 9, from an early low of 1.2113. At yesterday's close, the pair was quoted at 1.2104. If the franc advances further, 1.20 is seen as its next possible resistance level.

The Swiss franc hit 116.04 against the yen, a level unseen since May 8. The franc is thus 0.8 percent higher than the yesterday's closing value of 115.11. On the upside, the franc may possibly challenge resistance around the 116.5 zone.

Japan posted a merchandise trade deficit of 948.5 billion yen in August, the Ministry of Finance said - remaining in the red for a record 26th consecutive month.

The headline figure beat forecasts for a shortfall of 1,028.9 billion yen following the 962.1 billion yen deficit in July.

Moving away from an early 1-1/2-month low of 1.5363 against the pound, the franc recovered to 1.5249 amid the SNB decision. Further uptrend may help the franc to test resistance around the 1.52 mark. The pair traded at 1.5310 at yesterday's close.

Having fallen to a 1-year low of 0.9432 against the U.S. dollar at 7:25 pm ET, the franc changed path with pair trading at 0.9363. The next possible resistance for the franc is seen around the 0.93 area. The greenback-franc pair was valued at 0.9402 when it closed deals yesterday.

Looking ahead, the U.S. building permits and housing starts for August and U.S. weekly jobless claims for the week ended September 13 are due to be released in the New York session.