RTTNews Currency Alerts (December 13th, 2012).

Swiss Franc Strengthens After SNB Rate Decision 

12/13/2012 5:16 AM ET

The Swiss franc edged higher against the currencies of the U.S., Europe and the U.K. in early deals Thursday after the Swiss National Bank reiterated its stance that it will continue enforce the minimum exchange rate of 1.20 per euro.

Further, the central bank reiterated that bank is prepared to buy foreign currency in unlimited quantities. Besides, the Swiss National Bank decided to leave the target range for the three-month Libor at 0.0-0.25 percent, as widely expected.

For 2012, the SNB forecasts consumer prices to fall 0.7 percent. The bank expects overall prices to ease 0.1 percent in 2013 and inflation at 0.4 percent in 2014. In the foreseeable future, there is no risk of inflation in Switzerland, it said.

According to SNB, economic growth in Switzerland for 2012 is likely to remain unchanged at around 1 percent. For 2013, the SNB expects growth of 1 percent-1.5 percent.

On September 6, 2011, SNB set a minimum exchange rate of CHF 1.20 per euro, in order to avert major damage to the Swiss economy.

The SNB has enforced this minimum rate with the utmost determination since then as an appreciation of the Swiss franc would compromise price stability and would have serious consequences for the Swiss economy.

The Swiss economic growth in 2013 is likely to be weaker than previously thought due to deteriorating global economic conditions, a report from the State Secretariat For Economic Affairs (SECO) suggested today.

The gross domestic product is now expected to grow 1.3 percent next year, at a slightly weaker pace than the 1.4 percent growth forecast in September. The GDP projection for this year was left unchanged at 1 percent.

Growth is seen picking up momentum further in 2014 with the GDP expanding 2 percent, according to the report prepared by the Federal Government's Expert Group.

Switzerland's producer and import prices increased more than economists expected in November, data released by the Federal Statistical Office showed today.

The producer and import price index increased 1.2 percent on an annual basis in November, faster than the 1 percent gain economists had forecast.

On a monthly basis, producer and import prices remained unchanged in November, while economists were looking for a 0.3 percent decrease.

Elsewhere, finance ministers from the 27 European Union states on Thursday finalized an agreement, giving the European Central Bank more powers to oversee the functioning of banks in the crisis-hit region. The decision came ahead of the two-day EU summit in Brussels starting today.

In the U.S., the Federal Reserve announced that it will replace its "Operation Twist" program, which expires at the end of the year, with the purchase of longer-term Treasury securities at a pace of $45 billion per month.

The Swiss franc traded back above the 1.21 mark against the euro after SNB decision, rising to a 2-day high of 1.2090 around 4:20 am ET. Further rally could help the franc challenging resistance around the 1.2080 area.

The franc rose to a weekly high of 1.4914 against the pound after SNB, almost 0.3 percent or 50-pips higher-than Wednesday's close of 1.4963. The next key resistance target for the franc is visible at 1.49.

The Switzerland currency also tested yesterday's peak against the dollar, rising as much as 0.9249 around 4:25 am ET. If the franc extends advance, likely target level is seen at 0.9220.

Although the Swiss franc erased its Asian session advance against the yen in early deals Thursday, it managed to hold steady around the 90.0 level following the SNB rate decision. Long-term bias is bullish for the franc-yen pair, with 91.0 seen as the next likely upside target level.

Looking ahead, the U.S. weekly jobless claims, retail sales, PPI and the business inventories data are expected to garner market attention in the North American session.

by RTT Staff Writer