The Swiss National Bank made fresh efforts on Wednesday to tame a runaway franc but again steered clear of direct intervention, disappointing markets that had positioned for more radical measures and sending the currency sharply higher.
The central bank said it would further boost liquidity by expanding sight deposits to 200 billion Swiss francs from 120 billion francs, and would if necessary introduce further measures.
The announcement boosted the franc by as much as 2 percent against the euro, given players had speculated the SNB might set a lower limit for the euro-Swiss franc exchange rate, with some anticipating an announcement on Wednesday.
The market was expecting far more radical measures from the SNB like targeting a specific exchange rate. This is more of the same, and is inadequate in an environment where investors are seeking safe havens, said Lena Komileva of Brown Brothers Harriman.
Worries about the global economy and debt in the euro zone and the United States have prompted investors to pile into the safe-haven 'Swissie', which has rallied some 20 percent against the euro and the dollar in recent months.
The SNB had already responded by slashing its already low interest rate target to virtually zero and expanding sight deposits.
SNB policymaker Jean-Pierre Danthine said last week that no option was being ruled out in the central bank's campaign against the currency's strength, though he said some solutions were more practicable than others.
The SNB reiterates that it will, if necessary, take further measures against the strength of the Swiss franc, it said in a statement on Wednesday.
Among the proposals touted to dim the franc's appeal has been a tax on offshore deposits and an exchange rate target. The Swiss constitution enshrines independent monetary policy.
The SNB seems very determined to do what it can to reduce pressure on its currency and it still has more extreme cards in its hand that it could play depending on market conditions, said Kathleen Brooks, Research Director at Forex.com.
So while there may not be a euro peg today that doesn't mean there won't be one tomorrow.
To reach the new 200 billion franc mark in sight deposits the SNB said it would use foreign exchange swaps and repurchase its own debt -- called SNB bills.
Because of the strong currency, the SNB now forecasts a slowdown in economic momentum in the latter half of the year and corporate profits -- including at private bank Julius Baer -- have come under pressure.
This in turn has raised the heat on Swiss officials -- both in government and at the central bank -- to respond.
The Swiss cabinet may hold a press conference later on Wednesday, or possibly on Thursday, to discuss the impact the strong currency is having.
A Swiss newspaper reported on Wednesday that the government will propose a scheme exempting small and medium-sized companies and hotels from social security contributions and providing funding for tourism and innovation, in line with previous measures.
(Additional Reporting by Katie Reid; Editing by John Stonestreet)