SNB Says Franc Drop Has Reduced Significant Overvaluation
Thursday, 14 September 2017 15:35 WIB | FISCAL & MONETARY |SNB,Bank Sentral Swiss,

The Swiss National Bank tweaked its formal view of the franc™s level, saying that the currency™s decline against the euro is helping curb its œsignificant overvaluation.

œSince the last monetary policy assessment, the Swiss franc has weakened against the euro and appreciated against the dollar, the central bank said in a statement on Thursday. œOverall, this development is helping to reduce, to some extent, the significant overvaluation of the currency. The Swiss franc nevertheless remains highly valued, and the situation on the foreign exchange market is still fragile.

The change evolves the label œsignificantly overvalued that has featured in the SNB™s verbal repertoire since early 2015, when it put into force a policy of negative rates and interventions.

The central bank kept its deposit rate at a record low of minus 0.75 percent, as forecast by all economists in a Bloomberg survey. It also reiterated its pledge to buy foreign currencies.

An abatement of risk aversion and better economic momentum in the single currency area have caused the franc to drop more than 6 percent against the euro this year. It dropped to 1.15380 per euro in early August -- a level not seen since the SNB scrapped its 1.20-per-euro currency ceiling -- playing into the hands of the central bank, which has been trying to stem its rise for years. The franc was down 0.2 percent at 1.14859 per euro at 10 a.m. in Zurich.

Yet inflation remains feeble in Switzerland and economic growth fell short of that in the neighboring euro area during in the first half of 2017. The SNB cut its growth outlook for this year and now predicts expansion of just under 1 percent, compared with a previous forecast of roughly 1.5 percent. Consumer prices are foreseen increasing 0.4 percent in 2017 and 2018 and 1.1 percent in 2019, it said.

Source : Bloomberg

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