Swiss franc jumps as SNB's record loss fuels intervention doubts

[LONDON] The Swiss franc jumped to a one-week high against the euro after the central bank's record first-half loss fueled investor doubts about its ability to curb gains in the currency.

The franc strengthened against all 31 of its most-traded peers and climbed for a fourth straight day versus Europe's single currency, its longest run of gains since May.

The Swiss National Bank reported a loss of 50.1 billion francs (US$52 billion) in the six months ending June, the period when it abandoned its 1.20-per-euro ceiling on the franc's value. Since ditching the cap in January, officials have relied on negative interest rates and market intervention to stem the currency's gains.

The advance "comes on the back of the record loss that the SNB made in the first half after they abandoned the peg," said Valentin Marinov, head of Group-of-10 currency research at Credit Agricole SA's corporate and investment-banking unit in London.

"The clients thinking that the Swiss will abandon their efforts to cheapen the franc, given their mounting costs, are presumably the ones buying now."

The franc appreciated 0.4 per cent to 1.0551 per euro as of 9:19 am London time, after reaching 1.0549, its strongest level since July 24. It rose 0.5 per cent to 96.45 centimes to the dollar.

The gains may be short-lived, Marinov said.

Abandoning efforts to defend the exchange-rate ceiling on Jan 15 sent the franc surging to a record 85.17 centimes per euro. That jump has made Switzerland's currency the best performer this year in a basket of 10 major peers tracked by Bloomberg Correlation-Weighted Indexes, with a 12 per cent advance versus the group.

BLOOMBERG