The Swiss National Bank said aggressive foreign exchange interventions remain its main tool for pushing back against the appreciation in the franc caused by the coronavirus pandemic.
Keeping interest rates unchanged, SNB chief Thomas Jordan reiterated that the currency is ''highly valued,'' and said the central bank will continue to sell it as needed. Officials warned that the economy will contract about 6% this year.
The SNB has stuck with its tried-and-tested approach of negative interest rates and a pledge to intervene in currency markets even as its peers have ramped up their actions. The Bank of England, which announces its latest policy decision later on Thursday, and the U.S. Federal Reserve have cut rates, while the European Central Bank launched a new 1.35 trillion-euro ($1.5 trillion) asset purchase program.
With the global economy in recession, the epidemic has effectively dealt trade-reliant Switzerland a triple whammy. Some of its key export markets went into lockdown, and consumer spending softened, while the franc strengthened.
Seen as a haven by investors in times of market or geopolitical stress, the currency has been on an almost non-stop upward trend for the past year, exacerbating deflationary pressures.
The SNB has responded by stepping up the pace of its foreign exchange interventions, likely wagering the largest sums in years to stall its rally. Still, the franc touched a five-year peak against the euro last month and remains stronger than 1.10 versus the single currency.
Source : Bloomberg