ZURICH, March 8 (Reuters) - The Swiss National Bank is prepared to defend the franc from strengthening further than 1.20 per euro if tensions in Ukraine push up the Swiss currency, Swiss National Bank Chairman Thomas Jordan told a Swiss newspaper.
“We would intervene and buy unlimited quantities of foreign currency to defend the minimum exchange rate or take other measures if needed,” Jordan is quoted as saying in an interview with Basler Zeitung on Saturday, which also appears in Germany’s Boersenzeitung.
Jordan called the situation in the Ukraine, which the SNB is carefully monitoring, a “risk not to be underestimated.” But he also noted that the SNB has not intervened in currency markets to defend the franc since September 2012.
The SNB capped the franc at 1.20 per euro more than two years ago to stave off recession and deflation after investors seeking a safe haven from the euro zone pushed the unit close to parity.
Jordan said the SNB does not rule out using negative interest rates, in which banks essentially pay to deposit money with the central bank.
The SNB isn’t yet giving the booming Swiss housing market the all-clear, even after reinforcing efforts to dampen surging property prices in January.
“The pace has slowed, but we are far away from the soft landing we want. We don’t yet see the slowdown that we would like to see,” Jordan told the paper.
Real estate prices and mortgage lending have risen strongly in Switzerland in recent years, a by-product of ultra-low interest rates set by the central bank to lessen the appeal of the safe-haven franc.
That leaves the SNB with a dilemma as it cannot easily raise rates because that would clash with its policy of capping the franc.
“Hiking interest rates is not an option in this situation. That’s why the minimum exchange rate is our primary monetary policy instrument at the moment,” Jordan was quoted as saying. (Reporting By Katharina Bart; Editing by Hugh Lawson)