Swiss National Bank Warns That Swiss Franc Can Get Strong Again

Last time, Swiss Franc appreciated 41% in a matter of minutes and bankrupted many big firms and big investors. This happened in January when the Swiss National Bank made the surprise decision of unpegging the Swiss Franc from EURO. A few weeks back, Swiss National Bank (SNB) had issued a public statement that it would defend the Franc EURO peg vigorously. So the market got the shocker when SNB removed the peg without any warning.

The Swiss National Bank told its shareholders on Friday that uncertainty over the Greek debt crisis could push up the franc and that it remains willing to intervene in foreign exchange markets to weaken what it sees as too strong a currency.

“As recent developments show, the Swiss franc may strengthen temporarily in response to the current phase of increased uncertainty surrounding the Greek debt problem,” the central bank’s chairman, Thomas Jordan, said in remarks prepared for the bank’s shareholder meeting in Berne.

Swiss Franc (CHF) is considered to be a safe haven currency along with gold. Whenever uncertainty rises in the market, investors flock towards gold and CHF. The decisions of the European Central Bank will decide what happens.

The European Central Bank’s Governing Council will also hold its weekly reviews of the liquidity situation of Greek lenders, where additional Emergency Liquidity Assistance is approved. At the last meeting on April 22, it increased the available pool by 1.5 billion euros to 75.5 billion euros, indicating the standoff continues to aggravate deposit flight.

Patience is wearing thin among some governing council members with the ELA lifeline amid fears that the standoff threatens the solvency of Greek banks. At their May 6 meeting they will debate whether to raise the haircut on Greek collateral posted for ELA, a decision that could further intensify the country’s liquidity squeeze, according to another person familiar with the matter.

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