Swiss National Bank: Despite slight depreciation, franc 'significantly overvalued'

On Tuesday the Swiss National Bank (SNB) decided to keep its main interest rate at -0.75 percent, signalling that the local currency was "significantly overvalued".

Negative interest rates were adopted last December in an effort to deter investors from depositing their money in the local banks which in turn causes the Swiss franc to weaken.

On Thursday the bank published its latest monetary policy assessment which said: "Overall, the Swiss franc is still significantly overvalued, despite a slight depreciation."

"The negative interest rates in Switzerland and the SNB's willingness to intervene as required in the foreign exchange market make investments in Swiss francs less attractive; both of these factors serve to ease the pressure on the franc."

Earlier in September, the currency dipped below the psychologically important 1.10 level against the euro - the lowest level since the bank' s surprise removal of the minimum exchange rate of 1.20 francs per euro at the beginning of the year, which caused the currency to jump 30 percent against the shared currency.

EUR/CHF was last at 1.0954.

Some experts consider the Swiss franc's status as a safe-haven is being gradually wiped out.

Analysts at Unicredit said recently that there is plenty of space left for the Swiss franc to depreciate further.

The steep rise in the currency and the pressure that put on Swiss exports, which were rendered more expensive, has put pressure on the economy, the Swiss government said on Thursday as it forecast "below-average" economic growth this year and next.

Swiss GDP will rise 0.9 percent in 2015 and 1.5 per cent in 2016, said the State Secretariat for Economic Affairs (SECO) in Bern.

SECO said in a statement "the sharp rise in the value of the Swiss franc from mid-January put a significant brake on the Swiss economy during the first half of 2015."

"Despite a slight easing in the exchange rate situation over the last few weeks the Expert Group continues to anticipate that the economy will remain very subdued in the second half of the year and is likely to only start to strengthen again during the course of 2016."

A key prerequisite for an improvement of the economic environment is that the global economy remains on an upward course and, in particular, that the euro area is able to continue its rebound, the body said.