SNB Holds Steady Again As Franc Remains Strong

The Swiss National Bank decided to hold its interest rates unchanged at 0.25% once again, while lowering inflation forecast to 1% for 2012 and 1.7% for 2013. The main reason for the decision was the fact that the Swiss Franc (CHF) is already at historic highs against both the Euro (EUR) and the US Dollar (

) and a rate hike would make the currency even more attractive for the foreign investors. After the meeting, the SNB President Philip Hildebrand warned against the danger of the housing bubble and stronger currency, both of which he considers the main dangers the Swiss economy could face down the road. While recognizing that the exports remained surprisingly strong in the face of the recent impressive Franc rally, he also underlined the fact that the exporting companies can not decrease the margins forever and the strong currency will eventually hurt them. Obviously, that forces the SNB to wait with the rate hike until at least the European Central Bank raises its rates before making a move. In any other normal trading day, the news of an unchanged rate would most likely push the currency at least temporarily lower, but it did not this time, mainly because the Swiss Franc continues to remain one of the safe haven currencies in the midst of the never ending Greek saga. While a little better than yesterday, risk appetite is still very low around the markets as investors continue to seek safer currencies, especially as there are very confusing and contradicting news coming out of both the IMF and the Greek government about the debt crisis. As a result, the EUR/CHF fell further from 1.2125 to a new all time low at 1.1945, before rebounding a little and currently trades at 1.2040s. The Swiss currency moved higher against the British Pound (GBP) and even against the Japanese Yen too, as the GBP/CHF fell from 1.3840 to 1.3655 and the CHF/JPY rallied from 94.50 to 95.20.