SNB Jordan: Swiss Franc 'Significantly Overvalued'

 
  By John Revill 
 

        ZURICH--The head of the Swiss National Bank reiterated the franc remains "significantly overvalued," even as he cautioned the central bank had no easy fix for the problems the strong currency was causing Switzerland.
        Thomas Jordan, the chairman of the SNB's governing board, said the central bank was willing to intervene in foreign exchange markets, according to the text of a prepared speech for a conference in Lausanne on Thursday. He also said the bank can apply negative interest rates to check pressure on the currency.
        Mr. Jordan acknowledged the problems that the currency's high valuations was causing for Switzerland, but cautioned the situation was unlikely to improve soon.
        "In the current climate there is, regrettably, no easy solution that would absorb all external disruptions," Mr. Jordan said. "We must accept these challenging economic conditions for the time being."
        The SNB has been dealing with the effects of a strong franc since stunning financial markets in January when it scrapped a three-and-a-half-year policy of capping the currency at 1.20 francs per euro. The franc has risen about 13% against the euro, the currency of Switzerland's main trading partners, since the start of the year.
        The SNB has already imposed negative interest rates to blunt the appeal of the currency, a traditional safe haven in times of economic or political stress. Last week, the SNB held a key deposit rate at -0.75%, effectively imposing a charge on deposits from commercial banks. The SNB also held its target range for the three-month London interbank offered rate, or Libor, at -1.25% to -0.25%.
        Mr. Jordan said an improving global economy "should cushion the impact of the exchange rate shock somewhat." He also said that Switzerland was unlikely to fall into a deflationary spiral despite price drops.
        Mr. Jordan said the January decision to abandon the cap was forced by changing monetary policy stances in the world's main currency blocs. The European Central Bank recently launched a massive bond buying program, which has reduced the value of the euro.
        If the SNB had delayed its decision it would have lost control of monetary policy and would have had to abandon the minimum rate later, "under much less favorable conditions," he said.
        Write to John Revill at john.revill@wsj.com
        (END) Dow Jones Newswires

        June 25, 2015 04:00 ET (08:00 GMT)

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