Pressure set to rise on franc as capital escapes single currency

City A.M. Reporter
THE SWISS National Bank (SNB) must defend the cap it has set on the franc as the upward pressure on the safe-haven currency is only set to rise, the country’s economy minister said in an interview yesterday.

The latest data show the SNB’s foreign exchange reserves jumped 19 per cent in June as a flood of cash into Switzerland forced the Bank to sell francs to defend the cap, set at SwFr1.20 to the euro last September.

“The pressure on the SNB will increase. That is why it is all the more important to defend this minimum exchange rate without compromise,” Johann Schneider-Ammann told SonntagsZeitung.

The minister confirmed the government has contingency plans in case of the “horror story” of a Eurozone collapse, but added that he does not expect that to happen as Europe could not afford to let the single currency break apart.

However, he said capital controls would not be among any tools used, including imposing negative interest rates on foreigners’ Swiss franc deposits in Swiss bank accounts, pointing to the failure of previous such moves.