Swiss National Bank (SNB) president Thomas Jordan is having a hard time pleasing exporters even after presiding over a drop in the franc to its weakest level in a more than a year against the euro.

While at about Sf1.2390 (R11.68) to the euro, the currency is trading further away from the bank’s cap of Sf1.20 to the euro than at any point in 2012, its five-year average is another 12 percent away. Implied volatility from options trading shows the probability of it reaching that level within a year is 5.5 percent.

Even after the recent depreciation, the franc is 30 percent overvalued based on a gauge compiled by the Organisation for Economic Co-operation and Development.

Lobbying group Swiss Export says the currency needs to fall further to help companies become more competitive. The SNB, which was to give a first estimate of full-year earnings last week, amassed record foreign currency reserves as it defended the cap to ward off investors seeking a haven from Europe’s sovereign-debt crisis.

“This move in itself is not a big move,” Neil Mellor at the Bank of New York Mellon in London, said. “We’re looking at a currency that’s moved from Sf1.60 in 2008. Industrialists need more weakening in the Swiss franc.”

The SNB imposed its ceiling for the franc in September 2011 after investors, drawn to Switzerland’s lower ratio of debt to gross domestic product (GDP) than its euro zone peers, pushed the exchange rate with the euro toward parity. Demand for the refuge of Swiss francs eased at the start of this year as Spanish and Italian government bonds rallied after policymakers took steps to contain government-borrowing costs.

Spain’s 10-year government bond yield fell to 4.84 percent on January 11, down from a euro-era record of 7.75 percent in July, fuelled by the European Central Bank’s pledge to buy sovereign debt on any request for aid.

The rate on similar-maturity Italian bonds slid to the least since November 2010 last week.

Swiss 10-year yields, which fell to a record-low 0.36 percent in December, have climbed to 0.62 percent.

“We do not see a resumption of the acute tail-risk fears that were in place in mid-2012 and we think investors now have more confidence that policymakers will not let such risk get out of hand,” Valentin Marinov and Steven Englander at Citigroup wrote in a client note. They recommend selling the franc, betting it will weaken to Sf1.30 against the euro.

UBS is advising investors to speculate that the franc will depreciate to Sf1.255 a euro, Gareth Berry, a currency strategist at the firm in Singapore, said in a research report.

Swatch Group suffered from a strong franc because it made 90 percent of its products in Switzerland and exported 90 percent of those, chief executive Nick Hayek said.

Swatch said this month that gross revenue climbed 14 percent last year to Sf8.14 billion, taking into account “unsatisfactory currency developments”.

The Swiss government’s so-called expert group lowered its growth forecast for 2013 last month, saying GDP will expand 1.3 percent, from a September forecast of 1.4 percent. – David Goodman from Bloomberg