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Forex - USD/CHF pares gains as SNB move short-lived

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Forexpros - The U.S. dollar was up against the Swiss franc on Wednesday, spiking higher after the Swiss National Bank announced further measures to weaken the franc, before paring some of those gains as its effect on the market was short-lived.

USD/CHF pulled back from 0.7331, the daily high, to hit 0.7237 during European morning trade, still up 0.35% on the day.

The pair was likely to find short-term support at 0.7066, Tuesday's low and the all-time low and resistance at 0.7591, Tuesday's high.

The Swiss National Bank said earlier that it would take additional measures, including increasing liquidity to the money market and conducting foreign exchange swap transactions to curb recent gains in the Swissie.

"The massive overvaluation of the Swiss franc poses a threat to the development of the economy in Switzerland and has further increased the downside risks to price stability," the SNB said in a statement.

The central bank added that it would keep a close watch on developments in the currency market and take further measures if necessary to counter the rise of the franc.

The Swissie has climbed to fresh record highs against the greenback in seven of the past nine sessions.

Last week, the SNB narrowed its three-month Libor rate to 0.25% from 0.75%, saying the currency was "massively overvalued", adding that it "won't tolerate" a "tightening of monetary conditions" and therefore was taking measures against the franc.

Meanwhile, the Federal Reserve pledged on Tuesday to keep its benchmark interest rate at an all-time low, adding that it will maintain a loose monetary policy until "at least through mid-2013."

In a statement, the Fed said growth was much slower than expected and the labor market had deteriorated, underlining concerns over the U.S. economic outlook.

The Swissie was also lower against the euro, with EUR/CHF gaining 0.5% to hit 1.0418.

Later in the day, the U.S. was to produce data on the federal budget balance as well as reports on crude oil stockpiles and wholesale inventories.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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