Swiss franc not highly valued

The Swiss franc is not highly valued despite its nominal rise, Swiss National Bank Chairman Thomas Jordan told a Swiss newspaper, adding the central bank intended to be deliberately vague about how it sees the safe-haven currency.

“In the past, we referred to the Swiss franc as being highly valued or even significantly overvalued in order to give a signal regarding the need for intervention. At the moment, the Swiss francs valuation is no longer clearly high, and we do not want to comment on every move,” he told the Neue Zuercher Zeitung paper in an interview released on Saturday.

His comments come as the SNB focuses on using franc strength to fight inflation after years of currency intervention and negative interest rates to keep a lid on the franc for fear it would cripple the export-dependent economy.

Jordan said he did not see a period of competitive currency appreciation as other central banks adopt the same strategy.

“The yen is at a historic low, the pound sterling has lost significant value and the euro is comparatively weak. I dont see signs of competitive appreciation. The two strong currencies, the U.S. dollar and the Swiss franc, are considered safe havens,” he said.

If the franc appreciates so strongly that the monetary policy environment becomes too restrictive, the SNB will continue to intervene, he said. “But we also do not want to exacerbate the inflation problem with an excessively weak franc. We deliberately do not want to be more specific.”

Jordan said the SNBs balance sheet was a policy instrument it could use alongside its policy rate to ensure price stability.

“We are not going to reduce our balance sheet simply because of the sheer size, but if it helps us ensure price stability, of course we will,” he said.

Winding down the SNBs balance sheet “will probably take considerable time”, he said.

“If we were to sell large amounts of foreign currency holdings immediately, this would create too much appreciation pressure. The most favorable time to sell is when we have inflationary pressure, interest rates are clearly positive and the franc is showing a weakening trend.”