Switzerland's economy minister Johann Schneider-Ammann expects the Swiss franc to weaken to about 1.40 francs per euro in the medium term, he told a Swiss newspaper in an article published Sunday.
My minimum expectation is that the Swiss National Bank keeps the lower boundary of 1.20 [francs per euro], he told SonntagsZeitung. In the midterm, I expect purchasing parity to be reestablished. It lies at about 1.40 francs per euro.
The SNB set a cap at 1.20 francs per euro on Sept. 6 to put a halt to the appreciation of the Swiss currency that threatened to tip the Alpine country into recession.
The risk of a deindustrialization is still there at 1.20. Smaller and midsize companies cannot invest or replace staff, Schneider-Ammann said in the interview.
The franc has been trading in a range of 1.20-1.25 francs per euro since the SNB set its cap. It has gained ground toward the cap since central bank ex-Chairman Philipp Hildebrand stepped down in the wake of a scandal at the beginning of the month.
The franc's strength has nothing to do with Mr. Hildebrand's resignation. It is rather the downgrades by rating agencies that have led to uncertainty, pushing many towards the Swiss franc.
Schneider-Ammann stressed the SNB was independent and remained capable of acting despite the recent crisis.
(Reporting by Silke Koltrowitz; Editing by Hans-Juergen Peters)