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Swiss bank increases franc supply

The Swiss National Bank (SNB) said it is pumping more Swiss francs into the market to combat the currency's "massive overvaluation" against the US dollar and the euro.

The central bank said it will achieve this by raising overdrafts for commercial banks to 120 billion Swiss francs (£99 billion) from 80 billion francs (£66 billion).

The SNB said it will also conduct foreign exchange swap transactions to ease the value of the franc, which has been buoyed by its status as a safe haven asset for investors to park their cash during the current volatility in financial markets.

Wednesday's announcement came after the franc almost reached parity with the euro overnight.

The SNB said it will take further measures "if necessary".

The Swiss National Bank has been under pressure from companies and the government to do more to ease the export-sapping appreciation of the currency. Economists have predicted a rise in unemployment and slower growth later this year.

The Swiss Cabinet held an emergency meeting on the issue on Monday which was attended by SNB President Philipp Hildebrand.

Previous attempts by the SNB to soften the franc have failed due to overwhelming investor demand for the currency, along with gold, which has also hit record highs.

Analysts remain sceptical whether this latest attempt will work either.

"With liquidity already ample in Switzerland, the Swiss authorities could be doing little more than pushing on a string," said Jane Foley, senior currency strategist at Rabobank International.

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