UPDATE 1-Swiss franc hits lowest since 2015 currency cap shock

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LONDON, July 27 (Reuters) - The Swiss franc hit its weakest against the euro on Thursday since the Swiss National Bank removed its cap on the currency in January 2015, as investors bet the SNB would keep monetary policy loose as other central banks move towards tightening.

In an otherwise quiet session for the G10 group of major currencies in Europe, the franc slipped 0.6 percent to 1.1239 francs per euro, its weakest since Jan. 15, 2015, adding to falls of 1.8 percent against the euro since Monday.

The SNB has said consistently that the franc is overvalued since it caved in to years of pressure of capital seeking the perceived security of Switzerland in early 2015 and allowed the franc to rise.

Moves by monetary authorities including the European Central Bank have triggered expectations that the franc may finally be able to weaken, providing some relief for battered Swiss exporters.

“It is rather euro strength that is driving this,” said Antje Praefcke, a strategist with Germany’s Commerzbank, adding that the SNB may be helping to exacerbate the move, as many in the market say it has tended to do in recent months.

“We saw the SNB from time to time intervening when market moves were in its direction. It might be in the market (now) but at very low intervention levels, which is good for it as it is trying to limit the intervention it does,” Praefcke said.

She argued, however, that broad moves in the euro itself have begun to look increasingly overdone and may see a rebound soon. Others were less sure.

“The safe haven trade for the Swiss franc is starting to unwind,” said Michael Hewson, chief markets strategist at CMC Markets in London.

“The markets are starting to see some normalisation trades around the ECB policy (shift) as we head into 2018.”

Thursday’s moves also made the franc the biggest loser on the day against a broadly weaker dollar, falling 1 percent to 0.9597 francs per dollar..

“SNB Chairman Jordan this week reiterated that the franc remains significantly overvalued and that a policy mix consisting of negative rates and currency intervention remains in place,” Credit Agricole strategists wrote in a morning note to clients.

“Considering that the central bank sticks to such a rhetoric in an environment of more supported ECB monetary policy expectations and better risk sentiment already implies that the central bank will continue to do its utmost for reaching levels closer to fair value,” they said. (Reporting by Jemima Kelly, Saikat Chatterjee and Patrick Graham; Editing by Gareth Jones)