The Euro to Swiss Franc (EUR/CHF) exchange rate hit a 2-week high of 1.058 on Monday due to speculation that the Swiss National Bank is intervening in the currency markets.
Following last month’s, surprise announcement by the Swiss National Bank that it was scrapping its exchange rate cap on the value of the Franc against the Euro the Swiss currency has soared in value. Today, the Franc softened against all of its most traded peers on speculation that the Swiss National Bank was being active in the market in order to weaken the currency.
Over the weekend, a Swiss newspaper reported that the SNB was aiming for an exchange rate of 1.05-1.10 Francs per Euro. The central bank declined to comment.
‘It is chatter that there is an informal band and the sight deposits data suggests that the SNB is there in the market. The SNB is trying to smooth the flows and the volatility. In addition, we are seeing that our clients are staying away from this currency because of all the volatility that we have seen. The report of an informal target for the Euro/Swiss Franc is likely to reinforce the perception invisible hands have encouraged the Swiss Franc lower,’ said analysts.
Also weakening the Swiss Franc was the release of data, which showed that manufacturing activity in the Alpine nation fell for the first time in almost two years in January, adding to concerns over the health of the economy.
According to the Swiss SVME purchasing managers association and Credit Suisse, the nation’s purchasing managers index fell to a seasonally adjusted level of 48.2 last month, a drop from the preceding month’s figure of 53.6. Economists had been forecasting for a figure of 50.4.
In a PMI, any figure above 50 indicates expansion whilst a number below indicates contraction.
The single currency advanced as data showed that factory activity across the 19-member Eurozone inched higher but growth remained meagre.
Markit’s final January PMI came in at 51.0, in line with an earlier flash reading. Despite being at a six month high, the figure is only just above the 50 dividing line.
‘Eurozone manufacturing showed signs of pulling out of the doldrums at the start of the year, but the rate of expansion remained disappointingly meagre, vindicating the ECB’s decision to take drastic action,’ said Markit’s chief economist Chris Williamson in reference to the ECB’s €1.1 trillion quantitative easing programme announcement.
Further Euro gains are forecast to be limited due to concerns over the Greece situation and signs that the conflict in Ukraine will escalate.
Euro Exchange Rates:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.1321 ,
Euro,,British Pound,0.7538 ,
Euro,,Australian Dollar,1.4505 ,
Euro,,Canadian Dollar,1.4347 ,