LONDON, Sept 10 (Reuters) - The Swiss franc fell by the most in six months against the euro on Wednesday after comments from the Swiss National Bank which made no change to its position on policy but played on some market speculation of a move to negative interest rates.
The franc fell to a three-week low of 1.2119 francs per euro after the Wall Street Journal cited Swiss National Bank official Thomas Moser as saying the bank had always said negative rates were a possibility and would be used if need be.
The SNB afterwards underlined that this was consistent with its previous line on policy but Moser’s comments added fuel to speculation that it might be ready to make good on renewed threats in recent weeks to take action if needed.
“The Swiss National Bank has always emphasized that it would take further measures to enforce the cap if necessary, and SNB chairman Thomas Jordan has mentioned negative interest rates several times in interviews as an example in this context,” the central bank said in a brief statement to Reuters.
With official rates anchored near zero, the SNB has imposed a ceiling on the franc of 1.20 francs per euro over the past three years to protect Swiss exporters from the currency’s strength and keeping inflation in positive territory.
Moves by the European Central Bank to ease policy in the euro zone further, taking its deposits rate deeper into negative territory, has added to the SNB’s headaches.
Marcus Hettinger, a strategist with Credit-Suisse in Zurich, played down the change of a move to negative rates, but said that expectations the SNB would defend the 1.20 per euro cap it has held on the franc since 2011 capped any upside.
The franc also fell to a one-year low against the dollar and Hettinger saw the potential for more falls as U.S. interest rates head higher in anticipation of a rise in official borrowing costs next year.
“We have been long term dollar bulls and of course were disappointed in the first half of the year, but there really seems to be some momentum now,” he said.
“The franc can definitely fall further against the dollar, against sterling and some other currencies, but against the euro the interest rate differentials are so small that it will likely stay within a tight range.”
He has a 3 to 6-month forecast of 0.95 francs per dollar.
By 1457 GMT, the franc traded at 0.9372 per dollar and 1.21085 per euro. (Writing by Patrick Graham, editing by Anirban Nag)