Swiss ponder a peg to euro

Julian Harris
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THE EURO pared recent losses against the Swiss franc yesterday, after a senior Swiss central bank official hinted that its currency could be pegged to the euro to prevent further appreciation.

Investors have ploughed into the Swiss franc this week, viewing the currency as a relative safe haven while the debt crisis takes it toll on the troubled euro.

Yet Swiss National Bank vice chairman Thomas Jordan sent the markets wild yesterday when he refused to rule out temporarily pegging the franc. “Temporary measures that influence the exchange rate are part of our mandate so long as they are compatible with long-term price stability,” Jordan said.

The euro was 5.5 per cent up against the franc at CHF1.08 last night. Traders said the euro-Swiss pair could be fixed at 1.15 francs.

“However, we think such a strategy might be difficult to implement politically,” commented Thorsten Polleit of Barclays Capital, “in particular because of the strong domestic criticism the bank provoked by its mass purchases of foreign currency between the end of 2008 and May 2010”. The franc has surged 40 per cent against the Eurozone single currency since 2008.