July 17, 2013 / 1:16 PM / 6 years ago

SNB likely to scrap Swiss franc cap within 2 years - ZEW survey

* Respondents see 1.20 per euro cap gone within 2 years

* Majority see no change in euro/franc for next 6 months

ZURICH, July 17 (Reuters) - The Swiss National Bank will most likely scrap its 1.20 per euro lid on the franc within the next two years - and probably within a year, a survey of investors by the ZEW economic research institute showed on Wednesday.

Respondents in the ZEW’s July survey saw an average 38 percent probability of the cap being lifted within a year - split into a 14 percent chance it will go within six months and a 24 percent chance it will end in six months to a year.

Analysts thought there was a further 36 percent probability the cap would be removed in one to two years.

They saw only a 25 percent chance the central bank would keep the minimum exchange rate in place for more than two years, the ZEW said. That was down from the 29 percent probability analysts gave in the ZEW’s April survey.

The SNB introduced its cap on the franc in 2011 to ward off deflation and a recession, as investors fleeing the euro zone crisis bid the safe-haven unit up to record levels, hurting the country’s exporters and raising the prospect of deflation.

Though the franc has weakened since then, the SNB has repeatedly said the currency remains overvalued.

A majority of respondents forecast no change in the euro/franc exchange rate over the next six months, the ZEW said.

The proportion expecting a depreciation of the franc against the single currency fell to 21.4 percent in July from 41.3 percent the previous month, which the ZEW said was probably due to a fall in the franc in the last month.

The Swiss franc was trading at 1.2338 at 1300 GMT.

Inflation in Switzerland remains weak, with consumer prices falling 0.1 percent in June on an annual basis and rising 0.1 percent on the month.

Respondents followed the SNB’s lead to trim their average inflation expectations for 2013 and cut their forecast to 0.1 percent, compared to 0.2 percent in April’s survey.

The Swiss ZEW investor sentiment rose by 2.6 points in July to 4.8 points. (Reporting by Alice Baghdjian; Editing by Hugh Lawson)

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