Did you Hear What Happened to the Swiss Franc (CHF) Today?
Here are the Some of the Headlines for the Swiss CHF
“The Swiss Franc Is Out Of Control” (Business Insider)
“Swiss Stocks Tumble on Central Bank’s Surprise; European Equities Rise” (Bloomberg)
“It’s carnage.” (Trader)
“Going cuckoo for the Swiss” (The Economist)
Here’s how Business Insider described the situation: “More than three years of stability between the euro and Swiss franc just ended suddenly, as the Swiss central bank abandoned attempts to cap the currency’s value.”
Here’s what the Swiss National Bank had to say about its dramatic actions:
The minimum exchange rate was introduced during a period of exceptional overvaluation of the Swiss franc and an extremely high level of uncertainty on the financial markets. This exceptional and temporary measure protected the Swiss economy from serious harm. While the Swiss franc is still high, the overvaluation has decreased as a whole since the introduction of the minimum exchange rate. The economy was able to take advantage of this phase to adjust to the new situation.”
We asked Pawel, CurrencyFair’s head of Risk and Operations, for his take on the day’s activity.
CHF was pegged to the Euro for around 2 years, with the minimum rate (or the floor) at 1.2. As of today, this link has been removed (consequence of recent appreciation of USD against EUR and of CHF weakening against USD).
CHF jumped to 0.96 at some stage and is now close to parity at 1:1. Markets are super volatile as a consequence, and spreads are widening. Strong CHF is problematic to Swiss exports. It also impacts a lot of Eastern Europeans who have taken mortgages in CHF. They woke up today with an extra 30% to pay off to the banks.
Check out this Swiss Franc Video
Want more information? Here’s a Bloomberg Business discussion on the Swiss Franc action.