In its quarterly assessment of the general economy the Swiss National Bank reaffirmed the notion that the franc remains â€œhighâ€ and that the bank stands ready to take further measures at any time. The SNB noted that despite the enforced peg the Swiss franc remains grossly overvalued. It stated that, â€œThe real export-weighted external value of the Swiss franc declined by 3% from March to August, reflecting both the nominal depreciation of the Swiss franc and the lower rate of inflation compared to Switzerlandâ€™s most important trading partners. The real external value of the Swiss franc remains well above the long-term average. Thus, the Swiss franc is still high.â€
On the overall economy the SNB noted that business outlook remains cautious given the ongoing problems in the Eurozone but that outlook for real sales is â€œcautiouslyâ€ optimistic as consumer demand is relatively healthy. Overall, the SNB assessment of the economy and its monetary policy offered no fresh insight as Swiss authorities remained deeply committed to maintaining the 1.20 peg in EURCHF.
Earlier in the session the euro fell after reports that the SNB sold EURAUD as part of its long term diversification drive to recycle its inventory of euros into higher yielding Australian dollars but the pair has since rebounded strongly on reputed sovereign fund demand out of the Middle East.