UPDATE 1-Surprise KOF jump shows Swiss economy gathers speed

* KOF indicator up at 2.24 vs forecast of fall to 2.15

* KOF says manufacturing, exports main driver behind rise

* SNB still seen on hold due to strong franc

(Adds analyst comment, background, franc reaction)

ZURICH, March 30 (Reuters) – Switzerland’s economy is set to
pick up speed despite the record-high Swiss franc, an unexpected
jump in the country’s leading growth barometer showed, as global
demand for Swiss products and consumer spending remain strong.

The KOF indicator rose to 2.24 in March from an upwardly
revised 2.19 in February, the KOF Swiss Economic Institute said
on Wednesday. Analysts had expected the barometer to fall to
2.15 from the originally reported 2.18.(ECONCH: Quote, Profile, Research)

All sub-components of the indicator were in positive
territory, the KOF said, adding that the components measuring
the Swiss manufacturing industry and exports were the main
driver behind the recent rise.

“The KOF is really strong again and makes a mockery of
complaints with regard to the franc’s strength,” Informa Global
Markets’ Tony Nyman said.

The Swiss franc briefly rose to 1.2957 francs per euro on
the news, compared with 1.2995 before the data came out, but
then dropped again to earlier levels.

Robust Swiss fundamentals have underpinned the safe-haven
franc, which recently hit a fresh all-time high against the
dollar in the wake of this month’s devastating earthquake in
Japan. The franc also remains strong against the euro.

The currency’s appreciation is giving Swiss exporters a
headache and has been the key reason for the Swiss National Bank
to keep borrowing costs at ultra-low levels, despite a brighter
growth outlook.

SNB Vice Chairman Thomas Jordan said in a newspaper
interview on Tuesday the franc’s surge was limiting the
central bank’s leeway to raise interest rates. [ID:nLDE72S26G]

“For interest rates, the main factor remains the currency
and how it moves against the euro,” said Fabian Heller, analyst
at Credit Suisse. “In the near term, we consider a hike from the
SNB as very unlikely. Our forecast remains that the SNB will
hike in December.”

Financial markets are pricing in a first post-crisis
interest rate hike for September. (0#FES:: Quote, Profile, Research)

The Swiss National Bank revised up its growth forecast to
around 2 percent for this year at its quarterly policy meeting
on March 17, when it kept interest rates on hold.

But many economists are even more optimistic and the KOF
institute sees growth accelerating to 2.8 percent in 2011 from
2.6 percent last year.
(Reporting by Sven Egenter and Silke Koltrowitz; Editing by
Toby Chopra)

UPDATE 1-Surprise KOF jump shows Swiss economy gathers speed