Hildebrand Says SNB Can Intervene in Franc Market

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Swiss National Bank Vice-President Philipp Hildebrand said policy makers are prepared to intervene in currency markets at fixed exchange rates if necessary to prevent a “renewed appreciation” of the franc.

“There’s a good chance they’ll follow through with these measures,” said Reto Huenerwadel, senior economist at UBS AG in Zurich. “With concerns about deflation and rates already near zero, they have limited options.”

The franc has risen around 6 percent against the euro since October as the global financial crisis forced the Swiss central bank to cut its benchmark rate by 225 basis points, taking it to 0.5 percent. That’s smothering inflation and hurting exports, which make up more than half of Swiss gross domestic product.

“With short-term rates of practically zero, the SNB can’t prevent a further appreciation in the Swiss franc through a rate cut,” Hildebrand said in a speech in St. Gallen, Switzerland late yesterday. “The SNB is able to sell unlimited Swiss francs versus another currency. In an extreme case, it can commit itself at the same time to buying unlimited currencies at a fixed- exchange rate.”

The franc dropped after the remarks and extended its decline today. As of 7:51 a.m. in Zurich, it was at 1.5093 per euro from 1.5022 yesterday. It reached a record high of 1.4315 versus the euro on Oct. 27. Against the dollar, the franc was at 1.1562, having fallen late yesterday to 1.1616, the weakest since Dec. 15.

From Bloomberg News.