Franc Stays Weak After SNB Holds Rate Steady

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The Swiss franc remained lower against its most major counterparts in the European session on Thursday, after the Swiss National Bank left the policy rate unchanged and pledged to maintain its expansionary monetary policy to stabilise economic activity and price developments.

The SNB retained the policy rate and interest on sight deposits at a record low of -0.75 percent, as widely expected.

As the Swiss franc is highly valued, the central bank reiterated that it is willing to intervene more strongly in the foreign exchange market. In so doing, it takes the overall exchange rate situation into consideration.

The bank said its expansionary monetary policy provides favorable financing conditions, counters upward pressure on the Swiss franc, and contributes to an appropriate supply of credit and liquidity to the economy.

Further, the bank expects economic momentum to be weak in the fourth quarter of 2020 and in the first quarter of next year due to new restrictions imposed to control the Covid-19 pandemic.

Growing hopes of a U.S. stimulus package and optimism about the COVID-19 vaccine rollouts lifted investor sentiment.

Vaccinations in Germany and France will begin later this month after getting approval from the European Medicines Agency.

The franc fell to a 6-day low of 116.67 against the yen, after rising to 116.93 at 7:00 pm ET. The pair was valued at 116.80 when it ended trading on Wednesday. The franc is poised to challenge support around the 114.00 mark.

The franc touched 1.0822 against the euro, its lowest level since December 4. The pair was worth 1.0791 at yesterday’s close. Should the franc falls further, it is likely to face support around the 1.10 region.

Final data from Eurostat showed that Eurozone consumer prices declined for the fourth straight month in November.

Consumer prices were down 0.3 percent on a yearly basis in November, the same rate of fall as seen in October and in line with the preliminary estimate published on December 1.

The franc declined to its weakest level since December 4 versus the pound, at 1.2009. The franc had closed Wednesday’s deals at 1.1948 per pound. The franc is poised to challenge support around the 1.22 mark.

In contrast, the franc strengthened against the greenback, as the latter fell after the Fed’s pledge to keep very easy policy in place for sometime. The franc jumped to 0.8822 versus the greenback, a level unseen since January 2015. The pair had finished Wednesday’s trading session at 0.8849. Immediate resistance for the currency is seen around the 0.86 level.

Looking ahead, the Bank of England’s monetary policy announcement is due at 7:00 am ET. The Monetary Policy Committee is widely expected to hold the key rate at a record low of 0.10 percent and the quantitative easing programme at GBP 825 billion.

The U.S. weekly jobless claims for the week ended December 12 and housing starts and building permits for November are scheduled for release in the New York session.


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