The Swiss franc posted its biggest weekly decline against the euro since 1999 after the country’s central bank sold the currency to halt a 7.6 percent appreciation in the past six months.
The franc was also near the lowest level versus the dollar in three months after the Swiss National Bank’s first solo intervention in foreign-exchange markets since 1992. The SNB also said yesterday it will buy corporate bonds as it cut the benchmark three-month Libor target rate to 0.25 percent from 0.5 percent to revive the economy.
“The franc has hit a brick wall,” said Martin McMahon, a currency strategist in Zurich at Credit Suisse Group AG. “The SNB action clearly took the currency markets by surprise and its appreciation trend is now over.”
The franc weakened 0.3 percent to 1.5339 per euro by 6:21 p.m. in Zurich. It tumbled 4.7 percent this week, the most since the common currency was introduced in 1999. The franc slipped 0.3 percent to 1.1885 versus the dollar, from 1.1577 on March 6.
The Swiss economy will slump by as much as 3 percent this year, the most since at least 1975, the central bank said yesterday. Price pressures have evaporated in recent months as oil prices sank, the franc strengthened and domestic demand dropped. Prices will probably decline this year and inflation will be “very close to zero” in 2010 and 2011, the SNB said.
The franc’s appreciation made Swiss products less competitive in Europe and the U.S., where deepening recessions were already curbing demand. Lindt & Spruengli AG, the nation’s oldest chocolatier, faces the most challenging period in its 164- year history as franc gains hurt earnings and consumers pare spending, it said Jan. 20.
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The franc was also near the lowest level versus the dollar in three months after the Swiss National Bank’s first solo intervention in foreign-exchange markets since 1992. The SNB also said yesterday it will buy corporate bonds as it cut the benchmark three-month Libor target rate to 0.25 percent from 0.5 percent to revive the economy.
“The franc has hit a brick wall,” said Martin McMahon, a currency strategist in Zurich at Credit Suisse Group AG. “The SNB action clearly took the currency markets by surprise and its appreciation trend is now over.”
The franc weakened 0.3 percent to 1.5339 per euro by 6:21 p.m. in Zurich. It tumbled 4.7 percent this week, the most since the common currency was introduced in 1999. The franc slipped 0.3 percent to 1.1885 versus the dollar, from 1.1577 on March 6.
The Swiss economy will slump by as much as 3 percent this year, the most since at least 1975, the central bank said yesterday. Price pressures have evaporated in recent months as oil prices sank, the franc strengthened and domestic demand dropped. Prices will probably decline this year and inflation will be “very close to zero” in 2010 and 2011, the SNB said.
The franc’s appreciation made Swiss products less competitive in Europe and the U.S., where deepening recessions were already curbing demand. Lindt & Spruengli AG, the nation’s oldest chocolatier, faces the most challenging period in its 164- year history as franc gains hurt earnings and consumers pare spending, it said Jan. 20.
Forex Bloomberg News.