GENEVA, Jan 24 (Reuters) - Switzerland’s central bank cannot easily adjust its cap on the Swiss franc’s value, its vice-chairman said, challenging speculation that it could move the cap to a weaker level.
Switzerland imposed the limit of 1.20 francs per euro in September 2011 and has poured francs into the market, fending off investors whose search for an alternative to euros could drive up the franc and damage Swiss exports and tourism.
Until this month the franc had stuck tight to the 1.20 limit but greater confidence that the euro zone can ride out its sovereign debt crisis has left it floating freely in the past week at about 1.24.
“We welcome this development but, even if we consider the franc continues to be too strong, the currency cap policy is not designed to allow fine tuning of the level of the cap,” SNB vice-chairman Jean-Pierre Danthine told the Tribune de Geneve in an interview published on Thursday.
Danthine said that the SNB’s foreign exchange reserves were worth 427 billion francs at the end of December. He declined to comment on intervention, when asked if the bank was selling euros.
The strong franc has helped push Swiss prices down for the past few months and Danthine said this was expected to continue for several months more.
However, real estate prices were not falling.
“The property market dynamic remains too strong. It is not sustainable,” he said, adding that the SNB was studying the impact of steps already taken to cool prices, such as a restriction on using mandatory private pension savings known as the “second pillar”.
Asked if buyers might be forced to put down bigger deposits or if the SNB had some other ruse to calm the property market, he said: “Either there is a soft landing or other measures such as those that you mention will be necessary.”