The Swiss franc retreated from more than two-year highs against the US dollar, following SNB decision to maintain its benchmark interest rate unchanged.
Having hit the weakest level since November 2011 on Wednesday, USD/CHF traded at 0.8876 at 10:43 GMT, gaining 0.14% for the day. Support was likely to be received at December 11th low, 0.8840, also the lowest since November 4th 2011, while resistance was to be encountered at December 10th high, 0.8908.
On Thursday, the Swiss National Bank (SNB) maintained its benchmark interest rate unchanged at 0.25%, in line with analysts expectations. The SNB kept its 2013 forecast for economic growth unchanged, saying it expects economic expansion of between 1.5% and 2% this year. For 2014, the central bank forecasts that the GDP will increase by about 2%.
“Given the vulnerable economic situation abroad, downside risks still prevail for Switzerland,” said Thomas Jordan, President of the Swiss National Bank, cited by Bloomberg.
The SNB policy of near-zero interest rates fueled mortgage lending and caused a real-estate boom. Family homes had gained 24% since 2008, while apartment prices had surged 27%.
In September, the SNB required Swiss banks to hold a capital buffer, which represents 15 of mortgage-related assets. The decision came after the SNB realized that mortgage lending increases at a faster pace than the nations economy. Analysts forecast that the capital buffer may soon be increased to 2.5%, if the trend doesnt reverse.
“In an environment of persistently low interest rates, the danger of a further build-up of imbalances on mortgage and real estate markets remains considerable. For this reason, the SNB continues to monitor the situation very closely, and regularly assesses whether the countercyclical capital buffer should be adjusted.”, SNB reported, cited by Bloomberg.
Meanwhile, on Wednesday, US policymakers unveiled an agreement to ease automatic spending cuts by about 60 billion USD over two years and cut the nation’s deficit by $23 billion. US Senator Patty Murray, a Democrat, and Republican Representative Paul Ryan said that the budget proposal could prevent a government shutdown when funding authority expires January 15th and could favor the economy. The agreement sets a budget ceiling for the fiscal 2014 at $1.012 trillion and $1.014 trillion for the fiscal 2015.
The US budget agreement boosted speculations that the Fed might taper its stimulus program, which tends to devalue the greenback. Central bankers are set to reconvene next week. According to 34% of economists, participated in a Bloomberg survey on December 6th, the FOMC may begin to scale back its 85-billion-USD monthly asset purchases at the committee’s policy meeting on December 17th-18th rather than wait until January or March.
Later today, investors awaited the release of important string of data about the US economy. Reports on retail sales, retail sales less autos for November, initial jobless claims, the index of import prices are all expected to be released.
The number of people who are filing to receive unemployment insurance benefits for the first time, which is reported weekly by the U.S. Department of Labor, is a closely watched indicator because a continuing increase in its value suggests rising unemployment rate and a difficult economic environment. The indicator is volatile on a week-to-week basis so the four-week moving average is also closely observed. It differs from the Continuing Jobless Claims indicator, which consists of unemployed people who have already been receiving unemployment benefits for a while.
Elsewhere, having reached a session high at 0.8292 at 06:15 GMT, NZD/USD traded at 0.8278 at 08:22 GMT, gaining 0.24% for the day. Support was to be received at December 11th low, 0.8201, while resistance was to be encountered at December 11th high, 0.8310.