ALSO READSwiss central bank sticks to negative rates ahead of French election Swiss keep negative rates on hold ahead of French election Swiss, French to resume tax data exchange after resolving concerns Jeweller gets two-year imprisonment for not disclosing Swiss Bank account Swiss open probe into spying on Turks in Switzerland
By John Revill
ZURICH (Reuters) - Switzerland's central bank tempered its view of the Swiss franc's overvaluation on Thursday although analysts said the language shift should not be seen as heralding a departure from its ultra-loose monetary policy.
The Swiss National Bank retained its negative interest rates and said it remained ready to intervene in the currency markets to rein in the franc, whose soaring valuation it has long fought to restrain.
Instead the central bank acknowledged the franc's weakening against the euro in recent weeks, which it said "is helping to reduce, to some extent, the significant overvaluation of the currency".
The franc weakened on the news, with the euro gaining 0.4 percent to trade at 1.1504, still below the 1.20 floor the SNB defended until January 2015.
"We see absolutely no reason for us to change our monetary policy at present," Jordan told Swiss broadcaster SRF.
Analysts said the language tweak should not be seen as a shift by the SNB, which has built up foreign currency reserves 10 percent bigger than Switzerland's total economic output during its campaign to weaken the franc.
Instead the change was recognition of the euro's nearly 5 percent rise against the franc since early July as Europe's economic recovery gathers momentum and political risks ease.
That has helped Swiss exporters, whose biggest foreign market is the neighbouring euro zone.
"The change in the SNB's language was even more subtle than I thought it would be," said Karsten Junius, an analyst at J.Safra Sarasin. "But they will trigger no change in actual SNB policy."
Analysts from Credit Suisse, UBS and Zuercher Kantonalbank also expected no imminent change to SNB policy.
On Thursday, it kept its target range for the three-month London Interbank Offered Rate (LIBOR) at -1.25 to -0.25 percent and negative rates on sight deposits at -0.75 percent, as expected in a Reuters poll of analysts.
The SNB trimmed its GDP forecasts, although the weaker currency let it raise its inflation outlook.
The central bank is likely to remain cautious pending a consolidation of the franc's weakness.
"When the ECB gets towards the end of reducing its asset purchase programme that would probably lead to higher interest rates in the euro zone and allow the SNB to lift its own interest rates," Bee said.
The SNB would also want to see evidence that economic damage caused by the franc's surge over the last three years has been repaired. "The data here has so far been mixed," said Bee.
(Reporting by John Revill; Editing by Michael Shields and Catherine Evans)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)