SNB allows CHF appreciation, accepts lower EUR-CHF exchange rate

EUR-CHF slips below the 1.0680 mark following strong export data on Thursday. A generally weaker EUR caused downside pressure. The current level had provided good support for the currency since November.

Swiss FX reserves suggest that it has almost continuously intervened against CHF appreciation since the minimum exchange rate was abandoned two years ago. The current exchange rate is a clear sign that the SNB is increasingly allowing CHF appreciation.

The lower SNB now allows EUR-CHF to fall, the more likely it is that market participants will speculate on SNB allowing further CHF appreciation and the more rapidly EUR-CHF threatens to fall so that sooner or later SNB will have to react with increasing interventions again.

"The return to market based exchange rates for CHF remains a tightrope walk for the SNB. So far there is little to suggest that it will end soon, so much is pointing towards lower EUR-CHF levels medium term." said Commerzbank in a report.