Swiss National Bank Attempts to Weaken Swiss Franc to Boost Exports

August 19 00:00 2011

New York, August 18 (thealphareporter.com) – While most currencies in the world are suffering from devaluation and Central Banks across the globe are trying to strengthen it, Swiss National Bank (SNB) has different ideas. The SNB has announced that it will increase liquidity into the market. SNB has been actively using derivative instruments like swaps to do so. Their attempts bore fruit as the Swiss Franc fell 0.9% against the Euro and 0.7% against the dollar on Thursday. This has been largely attributed to a news that the Swiss Franc could be possibly pegged to the Euro, a falling currency. Also the Swiss National Bank announced that it would expand the deposits held by banks at central bank from 120 billion to 200 billion, effectively causing a shortage of Francs in the open markets.

Swiss Franc has been gaining strength in the past few months against the Euro and the US dollar. However, a rising currency is not necessarily good for the economy. As the Swiss Franc becomes more expensive, buyers from US and European countries will have to shell out more Dollars/Euros to buy Swiss goods. This makes importing Swiss goods an expensive proposition and is hitting the Swiss exports and therefore Balance Of Payments. Swiss National Bank is therefore looking to weaken its currency to let exports remain unhindered.

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