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Ceiling set on value of Swiss Franc

The Swiss National Bank has set a minimum exchange rate of CHF 1.20 to the Euro and said that it will enforce this minimum rate with the utmost determination.

IN A PRESS release issued earlier today the Swiss National Bank, which conducts Switzerland’s monetary policy as an independent central bank, announced that it will enforce a minimum exchange rate of CHF 1.20 to the Euro:

“The current massive overvaluation of the Swiss franc poses an acute threat to the Swiss economy and carries the risk of a deflationary development.

The Swiss National Bank (SNB) is therefore aiming for a substantial and sustained weakening of the Swiss franc. With immediate effect, it will no longer tolerate a EUR/CHF exchange rate below the minimum rate of CHF 1.20. The SNB will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities.

Even at a rate of CHF 1.20 per euro, the Swiss franc is still high and should continue to weaken over time. If the economic outlook and deflationary risks so require, the SNB will take further measures.”

The Euro, which had been trading around CHF 1.10 before the announcement, shot up to 1.2024 afterwards.

Those who have purchased property in Cyprus with the help of CHF mortgages will welcome the announcement. Many have seen their repayments soaring in recent years and fear that they could lose their home in the UK if they are pursued by the banks for the money that they owe.

Readers' comments

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  • Richard says:

    @Odd Job Bob

    Thanks for the videos. ‘Experts’ are divided on this issue – and at least one of your guys in the videos did say “anything could happen”.

    The financial world seems to me to be entirely self-regulated. Who is ultimately pulling what strings to what ends is not clear to 99.9% of us ordinary suckers going about our daily lives. If it was transparent – we wouldn’t have all piled in and incorporated ourselves into the melee.

    Right now – Moodys, Standard & Poor etc are all rating things very conservatively, but a few years ago they were being paid vast commissions to rate things AAA and A2 when frankly – many of the things being rated this highly were nowhere close to deserving them.

    So what will happen?

    Hopefully – some powerful folks some place will see sense in NOT solving the problem by depriving ordinary folks of what bit they have – so they can ring fence and keep 95+% of the world’s assets secure in the vaults of 1% of the world’s population (Swiss or otherwise).

    Meantime – let’s hope there are enough ordinary Swiss businesses out there hurting hard now that their exports have dried up due to a 30% currency rise in a very short timeframe. I’m sure they aren’t suffering silently!

    Let’s also hope the sluggish progress of the G7 brigade picks up tempo. I’ve been following the Merkel/Sarkozy talks with increasing weariness and gloom.

    We need another Maynard-Keynes right now. Anyone got any suggestions?

  • Odd_Job_Bob says:

    Aaaaaarrrrggghhhhh!

    Please have a look at this:
    http://www.bloomberg.com/video/73844098/

    In brief (and assuming it’s not a bluff as I sincerely hope), the SNB will buy tons of Euro in order to prop it up to the level of CHF 1.20.

    This means that, if say, you had a few billion Euro lying around that you didn’t need (as one does), you could sell them to Switzerland and they would gladly buy them up at a rate 8.3% above what the open market says. This will cost the SNB money, of which they have a finite amount to spend on this “peg” (does anyone remember Black Wednesday in 1992 when we tried to prop up the £ in the Exchange Rate Mechanism? Estimates for how much THAT ONE AFTERNOON cost us range from the “official” figure of £3.4bn to the newspaper figure of £27bn).

    Now, let’s just say you had an unlimited supply of Euros (short selling where you can sell something before you actually buy it), but the SNB has a limited amount of money to peg. This means that you can sell Euros until you BREAK the SNB’s back and they run out of money. Once the SNB say, “We can’t do it any more, let’s allow the Euro to achieve it’s natural market value”, it will fall back to say CHF1.10 or maybe even CHF1.00. My view is even lower (forced sale of an asset that everyone, bar the Swiss, want to get rid of). Expect the international currency speculators to be licking their lips and whetting their knives at this on-a-plate opportunity to inflict another near-fatal blow to the Euro…

    What then happens to all our investments in a Euro denominated country (cash and property included)?

    I really hope this is a bluff. I fear it’s not…

  • andyp says:

    I hope The Cyprus Banks pass on the savings immediately but I would not count on it.

  • Richard says:

    It’s a good start – but much more needs to be done.

    The whole of the International banking sector globally has blood on it’s hands over the gradual way it’s lowered citizen’s natural resistance to risk. Every banking institution is now affected by the aftermath of this gradual process over may decades – culminating in a feeding frenzy of greed in the period 2000-2010.

    For those interested in understanding just how corrupt this process got – watch the documentary film ‘Inside Job’ released in 2010.

    In a nutshell – it deals with the gradual erosion of protective laws in the USA to prevent banks ‘gambling’ with investors money & the rise of derivatives & CDO’s (Warren Buffett is not a big fan of these and never was). Bankers & traders gambled by day – and did girls and drugs (on company expenses – so – your money) by night on an industrial scale. The whole of the world’s financial trading system was fuelled by I.O.U’s and cocaine.

    Right now – in my eyes – there is no such thing as a respectable bank and respectable banking practices any longer. Whilst it’s true that ‘technically’ they can pursue what citizen’s have left after the apocalypse we’ve seen unfold – how much longer will it be before this sparks civil unrest? We may be closer than you think.

    Where are these individuals who created this ecosystem? Well – in the US – most of them would appear to be academic ‘advisors’ from ‘respectable’ business schools and colleges (many of who are on the payroll of financial services conglomerates) & the ex-CEO of one of the the worst corporate culprits is ‘advising’ the US treasury over fiscal policy. Now there’s a comforting thought for us all!?

    Let’s hope we don’t follow their lead in the Eurozone – but I suspect we may have many of our own home-grown rotten apples in the barrel.

    It’ll be interesting to see how it unfolds…..

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