The Swiss franc edged lower against its major opponents Tuesday after reports showed that UBS, the largest bank in Switzerland, urged its clients to keep franc balances as low as possible.
This followed Credit Suisse's decision last Monday that it would set negative rates on inter-bank cash accounts from December 10 onwards. However, the bank reiterated then that negative interest rates would not be imposed to individual account holders.
Earlier in October, Street Corp. (STT) and Bank of New York Mellon Corp (BK) also announced their plans to charge negative rates on Swiss francs.
Swiss National Bank Chairman Thomas Jordan said late November that the highly valued Swiss franc is burdening many companies in the current phase of modest global growth.
With economic growth weakening further in Europe, Switzerland's major trading partner, there can be hardly any boost external demand in the coming months, he said.
On September 6, 2011, SNB set a minimum exchange rate of CHF 1.20 per euro, in order to avert major damage to the Swiss economy. "Since then, the SNB has enforced this minimum rate with determination and is prepared to buy foreign currency in unlimited quantities. This monetary policy is reflected in a very substantial expansion in its balance sheet," Jordan said.
Swiss National Bank will announce its decision on interest rate on Thursday and the central bank is widely expected to keep its benchmark interest rate at zero.
Uncertainty about the political situation in Italy following the prime minister Mario Monti's decision to resign prompted traders to flee from high-yielding currencies in the morning.
However, the European common currency recovered its losses later as Pier Luigi Bersani, the front runner of prime minister in the coming election, pledged to support reforms.
The Swiss franc traded back to below 1.21 against the euro on the report, falling to a 5-day low of 1.2111 around 3:00 am ET. The next key support level to watch for the franc is at 1.2130.
German wholesale price inflation eased more than expected in November, data from the Federal Statistical Office showed today.
The wholesale price index rose 3.2 percent annually in November, slower than 4.6 percent rise in October. Economists expected the rate of inflation to ease to 4 percent.
The index fell 0.7 percent month-on-month against 0.1 rise expected. In October, prices were down 0.6 percent.
Against the pound, the Switzerland currency reached 1.5046 around 3:00 am ET, its weakest level since November 21. The next likely support for the franc is seen around the 1.5115 area.
The franc also erased its early morning gains against the currencies of the U.S. and Japan, falling as low as 0.9358 and 88.07, respectively around 3:00 am ET. This was down from early Asian session's 4-day highs of 88.38 against the yen and 0.9324 versus the dollar.
If the Switzerland currency extends downtrend, likely target levels are seen at 87.90 against the yen and 0.9385 against the greenback.
Looking ahead, ZEW survey results from both the Germany and the eurozone for December are due out shortly in the European session.
The U.S. whole sale inventories and trade data-both for October will garner market attention in the North American session.
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