(Adds no comment on direct market intervention)
GENEVA, Nov 20 (Reuters) - The Swiss National Bank stands ready to defend its cap on the franc by buying unlimited quantities of euros or taking other, undisclosed steps, a central bank board member said on Thursday.
The franc-euro exchange rate is hovering close to the 1.20 per euro floor set by the Swiss central bank in 2011, when the currency’s strength was squeezing exporters and threatening deflation.
“The SNB will continue to enforce the minimum exchange rate with the utmost determination,” SNB board member Fritz Zurbruegg told a business audience in Geneva according to prepared remarks.
“To this end, it is prepared to purchase foreign exchange in unlimited quantities and to take further measures immediately if required.”
Zurbruegg did not elaborate on what the further measures could be, but the SNB has in the past said it would not shrink from imposing negative interest rates on Swiss franc deposits to deter people from pushing up the currency’s value.
He declined to comment on any direct market intervention to weaken the franc, which has breached 1.2010 several times this week. The last time the SNB is known to have intervened was in September 2012.
His remarks, delivered to a banking audience in Geneva, were part of the SNB’s strategy to defend the cap in the run-up to a public vote on Nov. 30 on the bank’s gold reserves.
Under the “Save our Swiss gold” proposal, the SNB would be banned from selling any of its gold reserves and would have to hold at least 20 percent of its assets in the metal, compared with 7.8 percent last month.
Zurbruegg said the SNB has no plans to sell its gold holdings, which the initiative’s advocates fear. At 1,040 tonnes, the SNB has the seventh largest holding of the precious metal in the world.
Zurbruegg urged voters to dismiss the proposal, calling it harmful to the central bank’s efforts to ensure price stability in Switzerland.
“In practice, given today’s balance sheet total and gold price, the SNB would have to purchase around 70 billion Swiss francs ($73 billion) worth of gold - around two-thirds of the world’s total annual gold production,” Zurbruegg said.
A poll released on Thursday showed support has slipped to 38 percent, falling short of the majority backing it needs to become law. (1 US dollar = 0.9582 Swiss franc) (Reporting By Tom Miles; Writing by Katharina Bart; Editing by Jeremy Gaunt/Ruth Pitchford)