Swiss franc down on central bank intervention talk

By late afternoon London time, the euro rose to around 1.53 francs from just above 1.50 francs before the intervention talk, while the U.S. dollar spiked up to a high just above 1.0980 francs from 1.0650. Central banks can try to push their currency's exchange rate up or down by buying or selling in on foreign exchange markets.

The markets have been on the lookout for Swiss intervention ever since March when the central bank confirmed said it would intervene to stem the currency's sharp appreciation. Swiss National Bank officials could not immediately be reached for comment.

During the financial crisis, the Swiss franc's status as a safe-haven currency re-emerged even at a time when the economy was contracting sharply. A higher franc makes recovery harder because of its negative impact on exports.

Mansoor Mohi-uddin, managing director of foreign exchange strategy at UBS, said the SNB's apparent action would be reminiscent of the interventions the Bank of Japan undertook in 2003-4 that drew a line in the sand for the dollar's value at 100 yen before recovery in the domestic economy emerged.

"The SNB strategy seems similar now: big interventions to put a floor under 1.50 francs (for the euro)," said Mohi-uddin.

And as in Japan, Mohi-uddin said the SNB will only stop once recovery is evident.

"Thus 1.50 looks set to become the floor for the euro for the rest of the year as the SNB emulates the BoJ from earlier this decade," he said.