Analysts have indicated that this is the first major credibility test the SNB had to deal with regarding the currency policy. Yesterday the central insisted on its intention to do what it takes to maintain the Swiss Franc at 1.20 level. Peter Rosenstreich, the Chief Foreign Exchange Strategist at Swissquote Bank in Geneva indicated that this has acted as a wakeup call for the bank as their credibility is put on the test. The euro has weakened against major currencies due to concerns about the sovereign debt crisis.
The bullish run for the euro was sparked off by comments from the Spanish Prime Minister Mariano Rajoy who indicated that the country’s economy was in a extreme difficulty saying that the stiff budget cuts they are experiencing are better than the bailout they would get if the debt crisis were to escalate.
The Swiss Franc was trading at 1.20186 against the euro at the close of trading yesterday in London. The currency had earlier surged to as high as 1.19995. The Swiss Franc had stayed at an average of 1.2069 against the 17 nation currency since the interim Chairman Tomas Jordan took over on January 9. Economists are claiming that the current downside trend of the euro is as a result of risk aversion in the market. He said that traders are avoiding the euro adding that SNB interim chairman’s job will not be easy.
The SNB supervisory board is expected to meet on April 13 to discuss about the selection of SNB Chairman Philip Hildebrand.
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