BRUSSELS (dpa-AFX) - The Swiss franc drifted higher against most major currencies in European deals on Wednesday, as traders await a Swiss vote on whether to force the Swiss National Bank to increase its gold reserves, which will be held on November 30.
The voters will decide on whether to amend their country's constitution on an initiative entitled 'Save our Swiss Gold.' If the gold initiative passes, the Swiss National Bank should boost its gold reserves to at least 20 per cent of its holdings, nearly three times more than the current level of seven percent.
The bank will be prevented from selling its gold, and would require to repatriate reserves held in Canada and Britain to ensure that all of its holdings of the precious metal are stored within Switzerland.
Investors are concerned that an 'yes' result would curtail bank's ability to sell gold, and if it wants to buy euros to defend the floor it would likely need to buy gold in the same proportion. Economists are warning that such an outcome could force the SNB to turn to other unconventional methods to cause fall in the value of the franc, like negative interest rates.
The franc rose to a record high of 122.68 against the yen from yesterday's closing value of 121.92.
The Bank of Japan maintained its massive monetary stimulus a day after Prime Minister Shinzo Abe called for an early election and put off a proposed sales tax hike.
The Policy Board of the BoJ voted 8-1 to maintain the annual pace of increase in the monetary base at about JPY 80 trillion as they wait to see the effect of surprise expansion decision taken late last month.
The franc rose back against the greenback, approaching a 2-day high of 0.9571. If the franc extends rise, 0.95 is seen as its next possible resistance level.
The franc hit a session's high of 1.2008 against the euro, compared to Tuesday's closing quote of 1.2011. Further gains of the franc may see it violating the 1.20 cap.
On the other hand, the franc that climbed to a 6-month high of 1.4941 against the pound in previous deals reversed direction, as the latter lifted up after the Bank of England's minutes. The pair was trading at 1.5013, compared to yesterday's closing value of 1.4976.
Bank of England policymakers decided to leave its key rate at a historic low of 0.50 percent in a split vote for the fourth straight time at the meeting held on November 5 and 6.
Regarding the asset purchase programme, the MPC unanimously decided to maintain it at GBP 375 billion.
Looking ahead, the U.S. building permits and housing starts for October are to be released in the New York session.
The Federal Reserve's minutes from October 28-29 policy meeting are due at 2:00 pm ET.
Copyright RTT News/dpa-AFX