Zurich (AP) – For years, kept artificially cheap the Swiss National Bank (SNB) the Franks with Euro purchases. For the more expensive of the Franks, the worse it is for export companies. Your goods are in other countries then more expensive and therefore less competitive. Now the Fed stopped completely surprising its policy.
What did the National Bank?
In order to make its currency weak, the Swiss National Bank (SNB, SNB) has since 2011 bought in the currency markets again euros, so that the euro will cost at least 1.20 francs. Whenever had to be paid less for a euro – that the franc was stronger – the central bank intervened. This policy they are on now. Prompt shot of the Franks in height
The central bank decided on Thursday but something else. The monetary authorities increased the “penalty rate” for current account balances with the National Bank. If a specific allowance exceeded, 0.75 percent are due instead of 0.25 percent now. At the same time, the central bank keeps the purchase of foreign currencies open.
Why is a strong franc a problem for the economy?
For the export sector of the Alpine country’s strong currency is an enormous burden. Consumers, Switzerland is known for cheese, chocolate and watches – but are much more important export goods such as pharmaceutical products and machines. A strong franc increases the cost of exports of goods and gnaws as to the competitiveness of enterprises.
The euro countries are the main trading partner of Switzerland. In 2013 went to the Federal Statistical Office, 39.3 percent of Swiss exports to Germany, in second place followed by the USA and the euro-countries France and Italy. The tourism industry gets the strength of the Swiss franc to feel, because vacationing in the Alps land is more expensive. In recent years the number of overnight stays by visitors from Europe has dropped steadily, said the statisticians. For tourists who already expensive Switzerland will be even more expensive now, warned the Swiss Tourism Federation (STF).
Are there any other reasons for the decision?
Yes, for example, monetary policy the European Central Bank: The European Central Bank is expected to decide on 22 January, with bond purchases to pump billions more into the market. This could weaken the euro. The SNB would have to buy more euros to keep the franc weak. The central bank had to realize how hard it is to keep such a mark. Now they have chosen the bitter end instead of horror without end, said Pia hangover from Deutsche Bank.
Why is the franc so strong?
In addition to gold, the Swiss franc is considered by many investors as a “safe haven” in uncertain times. All about Investors buy the Swiss currency.
Who benefits from the decision?
With the release of the Swiss franc against the euro retailers expect in Baden-Württemberg particularly near the border with growing shopping tourism. Shopping in Germany will now be even more favorable for Swiss, said Olaf Katherine, General Manager of Retail Trade Association Südbaden. Of which are likely to traders in Germany, but also in other neighboring countries Euro benefit.
Communication from the SNB
Swiss statistical agency to foreign trade
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