Franc Climbs After Swiss National Bank Holds Rate

During early European deals on Thursday, the franc strengthened against its major counterparts after the Swiss National Bank decided to maintain its three-month Libor rate close to zero, as expected.

The target range for the three-month Libor will remain unchanged at 0.00-0.25 percent. The bank said it is prepared to buy foreign currency in unlimited quantities and maintain liquidity on the money market at an exceptionally high level

The central bank also said it will continue to enforce the minimum exchange rate of CHF 1.20 per euro.

Meanwhile, the latest report from the State Secretariat for Economic Affairs (SECO) showed that the Swiss economy will likely expand at a faster-than-estimated pace this year.

SECO revised up its forecast for the gross domestic product this year to 0.8 percent from 0.5 percent projected in December. Meanwhile, the growth prediction for 2013 was cut down marginally to 1.8 percent from 1.9 percent.

The Swiss franc rose to more than a 2-week high of 90.46 against the yen, compared to Wednesday's close of 90.01. On the upside, the franc may target 91.00 level.

Against the pound and the euro, the franc climbed to 1.4506 and 1.2088 from yesterday's close of 1.4592 and 1.2130, respectively. The next upside target level for the franc is seen at 1.205 against the euro and 1.445 against the pound.

Fitch Ratings has downgraded the UK's credit rating outlook to 'negative' from 'stable', citing the economy's vulnerability to adverse economic shocks due to high indebtedness and weak economic outlook.

The revision reflects "the very limited fiscal space to absorb further adverse economic shocks in light of such elevated debt levels and a potentially weaker than currently forecast economic recovery," the agency said.

The franc is now worth 0.9277 against the greenback, compared to an Asian session's new 7-week low of 0.9337. If the franc advances further, it may target 0.92 level. At yesterday's close, the pair was worth 0.9308.

Looking ahead, European Central Bank's monthly report and the Eurozone employment for the fourth quarter are due shortly.

The U.S. PPI for February, weekly jobless claims for the week ended March 10, results of the New York Federal Reserve's empire state manufacturing survey for March, Treasury Department's report on the flows of financial instruments into and out of the U.S. for January and the results of the Philadelphia Federal Reserve's manufacturing survey for March are expected in the New York morning session.