Here’s How the Swiss Central Bank May Respond to Franc Strength
- Currency breached parity versus euro, showing its haven appeal
- Franc’s broad nominal effective exchange rate at a record high
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Now that the Swiss franc has touched parity against the euro, what happens? Here is how the situation may evolve.
The spotlight is now firmly on the Swiss National Bank, which has been battling undue strength in its currency for years now, but only with modest success in its ability to hold the franc back. While the currency looked on course to weaken from a fundamental perspective at the start of the year given the then-evolving outlook for euro-area rates and the attendant ripple effect on Switzerland’s own domestic rates, the war has upended that calculus and pushed the franc higher.