"The SNB has concluded the sustained strong increase in mortgage loans and the prices of Swiss residential properties has caused the imbalances to become even greater in the current low interest-rate environment."
- The Swiss government
The appropriate level of the Swiss Franc is one of the main priorities for the Swiss National Bank. In order to avoid Franc's further appreciation, the SNB imposed a cap against the Euro in September 2011. While the Alpine economy was expanding moderately during the financial crisis, the monetary and exchange rate policy did not destroy deflation risks completely, as inflationary pressure still remains weak. At the same time, these measures are not preventing the development of the property bubble.
During the whole 2013 the SNB remained in a "wait-and-see" mode, as EUR/CHF was hovering highly above 1.22. Last week, however, after a request from the SNB the Swiss Bundesrat decided to raise the countercyclical capital buffer or CCB up to 2%, from 1% earlier, the EUR/CHF immediately fell below 1.228, while USD/CHF lost around 0.93% reaching 0.903. Currently the pair is bounded between the low of January 14 at 0.898 and a resistance at 0.908.
The activation of the same measure a year ago had no effect on markets, while this time it proves the SBN is not ignoring asset bubbles and is ready to do whatever it takes to avoid any risks for the economy. At the same time, the Franc's strength is likely to be short-live and in the nearest future the Swiss currency will continue loosing ground against both single currency and the buck.
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