The recent appreciation of the Swiss franc suggests that the Swiss National Bank (SNB) may now be willing to tolerate a (slightly) stronger currency. But we see the franc rising even further to reach parity with the euro later this year. Given the seismic moves in the Swiss franc over the past six years or so, its 0.7% rise against the euro in January seems rather trivial. But it is significant that the currency appreciated beyond CHF1.07 to the euro, a level which it had failed to breach on a sustained basis since November. This had appeared to mark a rough line in the sand for the SNB. Yet there have been no indications that this latest rise has provoked the SNB to intervene. As a reminder, the SNB still steps into currency markets to prevent the franc from rising too far or too fast against the euro, even though it no longer has an official ceiling for the exchange rate.
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