The SNB has needed to intervene in currency markets to halt appreciation of the Swiss franc (CHF in ISO-speak, or "Schweizerfranken" / "Franken"). Amongst other things, it makes Swiss exports less competitive ("menacing for the export sector" might be one way to express it), detracts tourism (or at least deters tourists from spending) and reduces the value of the SNB's reserves in Swiss francs.
The cause for the recent appreciation has been capital flight into "safe haven" CHF, owing to the US downgrade. The Greek crisis also spurred the acceleration of the CHF.
SNB in 1978 purchased 10.6bn CHF (6.6% of GDP) of foreign currency to weaken the franc, following which the CHF relaxed - a resounding success. At the time, the bank had an explicit exchange rate target against the Deutschmark.
No comments:
Post a Comment