Swiss franc cap tested as gold bugs push referendum

By Lucy Meakin
Bloomberg News
Monday, November 10, 2014

LONDON -- Switzerland's referendum on boosting gold reserves is already increasing pressure on the franc's cap against the euro, even as polls show voters remain undecided.

A rally in the franc pushed it to within 0.2 percent of the 1.20-per-euro ceiling set by policy makers in an effort to support the economy. That's the closest it has come to breaking through the cap since September 2012, when the central bank last intervened to defend it. Options traders boosted bullish bets on the franc to a two-year high.

The Nov. 30 referendum will ask voters whether the Swiss National Bank should keep at least 20 percent of its assets in gold, up from 8 percent now. To get the bullion, the central bank would need to sell foreign reserves, much of them in euros. That selling would drive the euro lower versus currencies around the world, including the franc.

We're already moving in the direction of 1.20 as the referendum comes more into focus, Georgette Boele, the global head of foreign-exchange and commodity strategy at ABN Amro Bank NV in Amsterdam, said by phone on Nov. 7. "If the vote passes, then a break is probable." ...

... From the remainder of the report:

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