USD/CHF Rises As SNB Leaves Negative Interest Rates Unchanged

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The Swiss franc will now be looking for direction in other places as the central bank left monetary policy unchanged at its September meeting. The franc is looking to remain one of the world’s top currencies in the final few months of 2020, and with global economic uncertainty, its safe-haven allure might be enough to elevate the franc even more.

On Friday, the Swiss National Bank (SNB) kept its benchmark policy rate -0.75% and the overnight deposits for commercial banks at -0.75%. Policymakers revealed that the central bank intends to keep rates at this level until at least 2022, defending the measure by alluding to the -0.6% average inflation rate and sluggish economic growth.

SNB officials added that they would be willing to intervene a great deal more in foreign exchange markets since the franc continues to appreciate. The SNB has been trying to put a lid on the franc’s ascent through a diverse array of monetary tools, but investors keep pouring into the franc as a shelter play in foreign exchange and the broader financial markets.

Overall, the SNB thinks Switzerland’s economy will continue its rebound heading into 2021.

Economic activity in Switzerland has picked up significantly since May due to the relaxation of health policy measures and to fiscal and monetary policy support. This should be reflected in a strong rise in GDP in the third quarter. The positive development is likely to continue in 2021.

The forecast revision is mainly due to the fact that the downturn in the first half of the year was somewhat less strong than feared.

On the data front, Switzerland will finish September by releasing the Economic Sentiment Index and the KOF Leading Indicators for the month.

The USD/CHF currency pair rose 0.17% to 0.9286, from an opening of 0.9267, at 19:02 GMT on Friday. The EUR/CHF tumbled 0.14% to 1.0800, from an opening of 1.0817.

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