By TraderVox.com
Tradervox (Dublin) – The Swiss National Bank Interim Chairman Thomas Jordan have had a hard time explaining the SNB’s commitment to upholding the 1.20 cap put there by his predecessor Phillip Hildebrand. On his April 10 Zurich press briefing, Jordan said that the fears about the SNB resolve is misplaced and that it was prepared to make unlimited foreign purchases to ensure that the cap is upheld. However, the demand for Swiss assets have increased to a point that investors were willing to get negative yields at a six-month government bills auction last week due to the increasing Spain’s borrowing cost similar to the one that led to the bailout of Ireland, Portugal, and Greece.
Currency strategists are saying that the current risk aversion linked to the euro is the main driving force for the demand of safe haven currencies and the Swiss is the best option for traders. They are citing that the CHF has a high liquidity and is tradable throughout all time zones; further, the economy is resilient hence many traders will want to buy the franc. However, the current pressure on the franc will ease in the coming months as analysts are forecasting the franc to weaken to 1.23 per euro in coming three months.
The franc has so far increased against 14 of the 16 most traded currencies in the first quarter. The gains against the euro have been limited to 0.4 percent but the Swiss currency has advanced by 8.2 percent against the yen and 3.5 against the dollar. The currency has pared its gains against the euro by 0.1 percent to exchange at 1.2027 per euro. The franc was exchanging at 91.95 centimes per dollar which is 2 percent lower than its December level.
Some analysts believe that the franc is overvalued against the euro and they are expecting EUR/CHF pair to trade at 1.35 in a year’s time. Survey data from Societe Generale is showing a decline in confidence on the SNB’s ability to hold the cap beyond June.
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