The Swiss Franc (CHF) exchange rate weakened against the Pound Sterling (GBP), Euro (EUR) and US Dollar (USD) on Monday as manufacturing output in the Alpine nation contracted and on speculation that the Swiss National Bank (SNB) has intervened in the currency market.
The Pound to Swiss Franc (GBP/CHF) exchange rate hit a session high of 1.407
Following the SNB’s shock move of ditching the Swiss Franc’s cap against the Euro the currency has experienced volatility as it seeks a position to stabilise at.
On Sunday, a Swiss newspaper reported that the SNB is unofficially aiming for an exchange rate of around 1.05-1.10 Francs per Euro. The SNB declined to comment on the rumours.
A report released early on Monday showed that bank deposits with the SNB increased last week, adding to the speculation that the central bank has been busy in the currency market.
‘It is chatter that there is an informal band and the sight deposits data suggests that the SNB is there in the market. The SNB is trying to smoothe the flows and the volatility. Also we are seeing that our clients are staying away from this currency because of all of the volatility that we have seen,’ said an FX strategist from Credit Agricole.
The Euro to Swiss Franc (EUR/CHF) hit a session high of 1.058
Also weakening the Swiss Franc was a separate report, which showed that manufacturing output growth in Switzerland weakened in January as the SNB ditching of the Euro cap worsened the outlook for the nation’s exports to the Eurozone.
According to the Manufacturing PMI, activity fell the most since November 2008, sliding to a seasonally adjusted figure of 48.2 in January down from the preceding month’s figure of 53.6 and was well below forecasts for a figure of 49.2.
In a PMI, any figure above 50 indicates expansion whereas a number below indicates contraction.
The report showed that over three quarters of companies in Switzerland were taken completely off guard by the SNB’s actions and the subsequent sharp appreciation of the currency.
‘The outlook has clearly been directly impaired by the withdrawal of the minimum exchange rate by the Swiss National Bank last month. The corporate landscape has therefore been very negatively affected by the dramatic appreciation of the Franc,’ said analysts from Credit Suisse Group AG.
The US Dollar to Swiss Franc (USD/CHF) exchange rate hit a session high of 0.934
