The Swiss Get “Fed Up”
We all know the expression “fed up” as meaning someone who is unwilling to put up with something any longer. This past Thursday it was the Swiss National Bank, the Swiss equivalent of our Federal Reserve, which showed it was totally fed up with its own policy on the relationship between the Swiss franc and the euro. The consequences were dramatic for markets across the world, but especially for foreign exchange.
Switzerland is not part of the European Union and continues to be strongly committed to its independence and neutrality. However three years ago Swiss National Bank (“SNB”) decided to cap the value of the Swiss franc against the euro. This decision was taken in the middle of the ongoing financials crisis, and was a mechanism to stop the rise in the value of the Swiss franc. At that time the Swiss franc was seen as a safe haven by many nervous investors. As a result the value of the currency had been rising steadily, thus making life difficult for Swiss businesses trying to sell their increasingly expensive goods abroad.