The Swiss franc pared its recent gains against its key counterparts in European morning deals on Thursday, after the Swiss National Bank retained its key interest rates in negative territory and reiterated that the domestic currency is still significantly overvalued.
The interest rate on sight deposit at the central bank was maintained at -0.75 percent, and the target range for the three-month libor between -1.25 percent and -0.25 percent.
Despite depreciating somewhat in recent months, the Swiss franc is still significantly overvalued, the bank said.
The bank added that it will remain active in the foreign exchange market in order to influence the exchange rate situation, as necessary.
The negative interest rate and the SNB’s willingness to intervene in the foreign exchange market are intended to ease pressure on the Swiss franc. The monetary policy thus helps to stabilize price developments and support economic activity, the bank said.
Meanwhile, European stocks are mostly lower on renewed concerns about the outlook for commodities.
The franc was trading mixed in the Asian session. While the franc held steady against the euro and the yen, it was slightly lower against the greenback and the pound.
Following the SNB decision, the franc retreated from its early high of 123.85 against the yen and a 2-day high of 1.0801 against the euro, trading lower at 123.24 and 1.0841, respectively. If the franc extends fall, 120.00 and 1.095 are seen as its next support levels against the yen and the euro, respectively.
Although the franc rose back against the greenback in the immediate aftermath of the SNB announcement, it trended lower within a short while. The pair was trading at 0.9862, compared to 0.9828 hit late New York Wednesday. The next possible support for the franc is seen around the 1.00 mark.
The franc, having advanced to 1.4912 against the pound upon the decision, fell back soon with the pair worth 1.4972. The pair was trading at 1.4947 when it ended Wednesday’s trading. The franc is seen finding support around the 1.51 zone.
Looking ahead, U.K. trade data for October is due shortly.
At 7:00 am ET, the Bank of England’s interest rate decision is due. Economists forecast the bank to hold interest rate at 0.50 percent and asset purchase target at GBP 375 billion.
Canada new housing price index for October, U.S. export and import price indices for November, weekly jobless claims for the week ended December 5 and monthly budget statement for November are to be published in the New York session.
The material has been provided by InstaForex Company – www.instaforex.com