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Central bank determined to enforce euro cap

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09:59 CEST+02:00

The Swiss central bank pledged on Thursday to buy unlimited quantities of foreign currency to defend with "utmost determination" its cap on the franc's exchange rate against the euro.

"The Swiss National Bank will enforce the minimum exchange rate of 1.20 franc per euro set on 6 September with the utmost determination. It is prepared to buy foreign currency in unlimited quantities," said the bank in a statement.

"Even at a rate of 1.20 franc, the Swiss franc is still high and should continue to weaken over time," the Swiss National Bank said, adding that it would take further measures if necessary.

The central bank had put a floor on the euro's value against the Swiss franc in order to shed the Swiss currency's haven status.

Amid the public debt turmoil engulfing the European Union, investors have massively bought into the franc, sending it to record highs against the euro and threatening the country's export-led economy.

On Thursday, the central bank said that if not for its cap on the franc-euro exchange rate, "there would be a substantial threat of recession."

For now, it was forecasting growth to reach between 1.5 and 2.0 percent for 2011, slightly weaker than the 2.0 percent growth it predicted in June.

It also kept its expansionary interest rate policy, to maintain the three-month Libor at zero.

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