Swiss Finance Minister Expects CHF To Depreciate After Cap Removal

January 19, 2015 Share Print 0

Swiss officials sought to reassure the country on Sunday that a shock decision by the central bank to scrap its cap on the franc would not destabilize the economy ahead of a crucial week in which the European Central Bank could announce a massive bond-buying program.

Finance Minister Eveline Widmer-Schlumpf said she expects the exchange rate to settle down at around 1.10 per euro, a level she believes firms in the export-orientated country should be able to withstand.

“I’m confident that the economy will be able to cope with this decision. Companies are in a far better position than in 2011 when the cap was introduced,” she told the SonntagsBlick and Schweiz am Sonntag newspapers.

The Swiss National bank stunned markets on Thursday when it abandoned its three-year-old cap on the franc of 1.20 per euro, saying the policy had become unsustainable.

The move sent the franc soaring, prompting firms across Switzerland to warn of a plunge in profits, with the luxury, industrial and tourism sectors most exposed.

With inflation already running at -0.3 percent year-on-year, Switzerland also risks importing deflation if the franc stays at its high level against the euro.

via CNBC

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Alfonso Esparza

Senior Currency Analyst at Market Pulse

Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.