The Swiss National Bank will set a minimum target rate of 1.2 Francs/Euro

• Swiss Franc falls to a 2-month low, against the leu, at the NBR exchange rate

The Swiss franc yesterday fell to a two-month low, as the NBR posted a reference exchange rate of 3.5344 lei/franc.

The Swiss Franc fell 7.3% against the leu yesterday, after the NBR posted a reference rate of 3.8133 lei/franc.

The last time the Central Bank announced a lower exchange rate was July 8th, when the franc was quoted 3.4792 lei.

The weakening of the franc comes as a result of the strengthening of the Euro against the franc on the international markets, after the Central Bank of Switzerland announced that it would target an exchange rate of a minimum of 1.2 francs/Euro, by buying currencies in the market in unlimited amounts.

"The overvaluation of the Swiss Franc is an acute threat to the Swiss economy and carries the risk of deflationary pressure. (...) The Swiss National Bank will implement this exchange rate (ed. note: 1.2 Francs/Euro) with the utmost determination and is ready to buy unlimited quantities of foreign currencies", according to the announcement made by the bank.

The franc fell 7% against the Euro after the announcement, to the level of 1.1870 francs/Euro, on the international markets. However, around 13:00 GMT, the Swiss franc pared the losses and reached 1.2030 francs/Euro.

Economic analyst Florin Cîţu considers that the message of the Swiss Central Bank indicates it is reacting to what is happening to the Swiss Franc. He said that, throughout history, it has been demonstrated that in a small and open economy, banks can not maintain a pegged exchange rate.

He said: "The issue is not bringing the exchange rate at the desired level, the problem is successfully keeping it there, and what that will cost the Swiss economy".

Nicolaie Chidesciuc, chief economist at ING Bank, said that the announcement of the Swiss Central Bank proves its commitment to reaching the announced level of 1.2 francs/Euro. The unlimited buying of foreign currencies demonstrates the fact that the bank wants to bring the exchange rate to the level it has set, according to him.

Fabian Heller, economist at Credit Suisse Group AG, in Zurich, said, as quoted by Bloomberg, that the Swiss Central Bank has pledged to create unlimited amounts of Swiss Francs to sell against the Euros, to protect the exchange rate.

"They (ed. note: the Swiss National Bank) will pursue their commitment, because otherwise their credibility would be seriously affected and speculation would begin anew, most likely leading to further strengthening of the Franc", the analyst said.

At the end of August, the Swiss Central Bank owned the equivalent of 253.4 billion Swiss Francs in foreign currencies, compared to 182.1 billion franks in the previous month, as a result of the steps taken to weaken the Swiss currency, according to Bloomberg.

The Swiss Franc has gained 3.22% against the leu since the beginning of the year, at the exchange rate of the NBR.