Sterling gains on Swiss franc as SNB doubts Brexit

Sterling ticked an ace higher against the Swiss franc as that country's central bank left its key interest rate unchanged today and said it intended to intervene in the event of turbulence after Britain's vote on European Union membership.

The bank's president, Thomas Jordan, said he did not expect Britain to quit the EU on 23 June, adding that he did not consider a so-called Brexit vote as the most probable outcome, even though UK polls suggest the in-out race is closely contested.

"This (Brexit) is an event that is possible, and the probability increased in the last few days, but the base scenario that we have does not include the Brexit," Jordan told reporters in Bern, including Bloomberg.

He added that turbulence could arise after the vote, in which case Swiss National Bank intended to stabilise the market. It left its benchmark rate at 0.75%, as forecast.

The Swiss franc is perceived as a safe-haven play by currency traders spooked by the prospect that UK might quit the EU.

At about 13:30 BST, sterling was up 0.15% at 1.3676 Swiss francs, but this minor rise ran overall against the grain of a month-and-a-half long and 5.9% slide against the defensive unit. On 30 May, sterling was at 1.4527 Swiss francs.

SNB also underlined its willingness to undertake foreign exchange-market interventions if it believed these were needed, given the franc appeared significantly overvalued.

"Fundamentally, we have room to manoeuvre on these two instruments," said Jordan, quoted by the news agency.

"In a first phase, should the situation arise, it will be about stepping in to markets in a stabilising manner to prevent exaggerations."

However, separately, Rabobank said on 10 June that demand for safe-haven assets would remain firm and that the franc would continued to be well underpinned.

Rabobank expected UK to remain within the EU, but also noted the significant risks to this view. Either way, the franc would perform well, it said.

At 13:48 BST, the euro was down 0.1% to 1.08150 Swiss francs. On 3 June it was at 1.10925 francs.

"On a Brexit, we would expect EUR/CHF to fall hard back towards the 1.05 (francs) level initially. On a clear Remain vote EUR/CHF should be able to drift back towards 1.10," it said.

The franc's safe-haven appeal was hard to beat -- Switzerland was running a healthy current-account surplus and a budget deficit that was close to being balanced.

"That said, for a long time safe haven demand for the CHF has been the thorn in the side of both the Swiss National Bank and the Swiss economy," Rabobank argued.

SNB intended to follow market developments closely on a 24-hour basis, especially around the 23 June vote by UK.