Switzerland Caps Value of Franc
September 7th, 2011Via: Bloomberg:
Switzerland opened a new round in a global currency war as fading economic growth forces policy makers to step up efforts to spur expansion.
The Swiss National Bank’s decision yesterday to cap the franc’s rate for the first time since 1978 marked a bid to protect trade hurt by the currency that last month reached a record high against the euro and the dollar. The franc plunged 8.4 percent yesterday against the euro, the most since the creation of Europe’s single currency. It was little changed in Asian trading, standing at 1.204 per euro at 1:42 p.m. in Tokyo.
The initiative may leave Norway and Sweden vulnerable to unwanted gains in their currencies as countries such as Brazil and Japan fight to limit appreciation amid a flight from the euro debt crisis and near-zero interest rates in the U.S. With Group of Seven finance chiefs set to hold talks this week, it also exposes the clash among policy makers counting on exports to offset slumping demand at home.
“We will see a lot more intervention now, we will see manipulation on a grand scale,” said Stuart Thomson, who helps oversee about $120 billion as a portfolio manager at Ignis Asset Management in Glasgow. “Traditional safe havens are trying to undermine the value of their currencies.”
