(Updates with central bank meetings and reaction)
* Franc, Norwegian crown gain after central bank comments
* Market puts aside U.S. pledge on keeping rates low
* Sterling volatility jumps as Scots vote on independence
* Swiss franc up after SNB takes no action
By Patrick Graham
LONDON, Sept 18 The Swiss franc and Norwegian
crowns both gained after central bank meetings on Thursday,
their moves a reflection of the greater volatility and activity
that has begun to return to currency markets after a slack year.
The dollar, whose surge since July is at the heart of a
broad rise in volumes across major currency pairs, jumped
another 1.5 percent against the yen after the Federal Reserve
sent another shock through the financial system by raising its
projections on future interest rates.
The dollar trimmed some of those gains in morning trade in
Europe but many dealers and analysts now read the Fed as
confident it is on the path back towards rises in interest rates
that would put an end to an era of universally low borrowing
costs in the developed world and fund a multi-year rally for the
The past month has also brought a surge in event risk and
other opportunities for traders, ranging from Scotland's
referendum on independence to surprise action from the European
Central Bank on interest rates and resulting pressure on others
like the Swiss National Bank to act.
"There is a lot going on and that is generating a lot of
moves in the market and a lot of volume too," said Ian Stannard,
head of European currency strategy at Morgan Stanley in London.
"In terms of events it has been one of the busiest weeks we've
had in a long time."
The volatility implied by currency options contracts for
months has been nailed to levels as low as 4 percent that leaves
foreign exchange dealers struggling to meet targets on returns
and puts pressure on the business models of retail brokers.
On Thursday on the yen, one month vol had recovered to more
than 7 percent, on the euro to 6.4 and on sterling more than 8
The Norwegian crown was the biggest gainer, up more than 1
percent against both the euro and the dollar after Norges Bank
raised its forecasts for both growth and inflation next year and
said it no longer saw downside risks to its forecast that
interest rates would stay on hold until 2016.
It had previously said there was some risk of a cut.
"Norges Bank was clearly more hawkish than expected, raising
the short-term rate path and only lowering the long-term rate
path marginally," Danske Bank said in a note to clients after
"Fundamentally, we remain bullish on NOK on relative growth
expectations and carry. We forecast it at 8.10 against the euro
in one month, 7.95 in six months and 7.75 in a year."
The franc gained around 0.3 percent against the dollar and
edged back towards the 1.20 franc per euro cap the Swiss
National Bank has held against the euro for the past three
With the euro at its weakest against the dollar in a year,
there had been some speculation that the central bank might
tweak its policy message or even take more action. Instead,
there was nothing new in the bank's statement for those players.
Sterling made more progress against the dollar and edged
towards its highest in two months against the euro, the result
of growing conviction in the market that a "No" vote will
prevail in Thursday's Scottish referendum, heading off the
threat of a shock to the UK political and financial status quo.
The vote still looks very close and implied overnight
volatility doubled on the options market to just under 35
percent on Thursday, almost 10 times levels seen a month ago.
But that may reflect just as much expectations the pound
will rebound sharply in the event of a "No" vote as fears of the
market turmoil that could follow a "Yes".
Many London dealing rooms are expected to be staffed through
the night as the results, expected in the early hours of Friday
morning, begin to trickle in.
"We just have to wait for the results now," said Lee
Hardman, a strategist with Bank of Tokyo-Mitsubishi UFJ in
London. "If the polls are right then sterling should rebound
(Editing by Nigel Stephenson; Editing by Ruth Pitchford)