UPDATE 1-Weak Swiss exports maintain pressure for franc cap
* Trade surplus of 2.8 bln Sfr in October
* SNB to stick to exchange rate floor-economist
* Swiss franc still seen as overvalued (Adds detail, economist and analyst quote)
By Silke Koltrowitz
ZURICH, Nov 20 (Reuters) - Swiss exports were subdued in October, dragged down by weak sales in the machinery and electronics industry, as firms suffered from a Swiss franc they say is still overvalued one year after the central bank capped it.
Exports from Switzerland, adjusted for two extra working days this October, fell 1.1 percent and a real 16 percent to 18.6 billion Swiss francs ($19.79 billion), the Federal Customs Office said on Tuesday.
The implied price rise was distorted by an exaggerated price development for jewellery items, the office said, leading to the large difference between the nominal and real figures - which are adjusted for inflation.
After a brief respite this summer, Swiss exports, which have been helped by the Swiss National Bank's capping the franc at 1.20 per euro, are now back in negative territory.
Overall, Switzerland still ran a merchandise trade surplus of 2.821 billion Swiss francs in October but exports have also been hit by weak demand in the euro zone, Switzerland's biggest export market.
"Exports are still rather weak. If you look at the main industries like machinery, they are still in negative territory year-on-year," Credit Suisse economist Maxime Botteron said.
"I wouldn't say there was a change in the trend for the export sector. It's still a challenging environment with a strong Swiss franc," he said.
Exports in the important chemical and pharmaceutical industry grew by a real 1.1 percent, while sales of machinery and electronics slid by 8.8 percent.
After declining for the first time in 2-1/2 years in September, watch exports rose 13.2 percent in nominal terms in October to 2.1 billion francs.
Prices of exported goods rose by 17.7 percent but the rise is being distorted by an exaggerated development in jewellery goods, Hasan Demir from the Federal Customs Office said.
The prices of jewellery items rose by 732 percent, which he said was due to a kink in the office's economic modelling which was likely to be corrected a month later.
"Excluding the jewellery and pharmaceutical industries, prices for exported goods rose 3.4 percent," he said.
Swiss National Bank Chairman Thomas Jordan said last week the reasons behind the setting of the minimum exchange rate were still valid. Vice-Chairman Jean-Pierre Danthine said on Monday the SNB could maintain the cap as long as needed.
Speculation that the bank will move the cap on the franc to try and push the currency lower and stimulate growth has largely eased, with policymakers saying they cannot just move the figure as they please.
"We think the Swiss National Bank will stick with its exchange rate floor for the time being as there is no visible rebound of the exports," Botteron said.
At its September policy meeting, the SNB cut its 2012 growth forecast to one percent from 1.5 percent after the economy shrank unexpectedly in the second quarter.
($1 = 0.9399 Swiss francs) (Additional reporting by Caroline Copley and Martin de Sa'Pinto; editing by Jon Boyle and Patrick Graham)