The Swiss franc jumped to a one-month high against the euro on Tuesday after the head of the Swiss National Bank Thomas Jordan warned that the extent of what monetary policy can achieve is not unlimited.
EUR/CHF dropped 0.84% to 1.0930, the lowest level since January 22 from around 1.1029 earlier.
The franc strengthened after the SNB chairman warned it could not take “endless” steps to ease monetary policy.
“Despite the expanded set of monetary policy instruments available, the options are not unlimited,” he said.
Jordan also noted that central bankers must continuously assess the effects of their monetary policies, which can weaken over time.
Interest rates cannot be lowered into negative territory without at some point prompting a flight to cash, he warned.
The remarks were seen as an indication that the SNB would refrain from making further cuts to interest rates.
The SNB is to hold its next monetary policy meeting on March 17.
Jordan also added that the Swiss franc remained “considerable overvalued” against the euro in real terms.
The franc rose to the day’s highs against the dollar, with USD/CHF down 0.63% at 0.9932.