The period of unfettered currency trading may be done for the G10 with the intervention of the SNB to lower the Swiss exchange rate. The CHF had moved higher earlier in the credit crisis with the flight to quality in Switzerland. This move had been great for those that had Swiss deposits but has been clearly hurting the economy. Note that many foreign depositors do not hold their money in CHF so it may not have a significant negative effect on banking services.
The greatest fear in Switzerland is deflation since the monetary interest rates bullet have all been used up. One of the easiest ways to offset deflation risk and make the currency lower is direct intervention.
This is also good for Eastern Europe which has significant liabilities in CHF. This will relieve some of the key pressure in this financial crisis.
The key issue to watch is to see whether this will be a policy followed by other central banks whereby we get into a war of competitive devaluations.
The greatest fear in Switzerland is deflation since the monetary interest rates bullet have all been used up. One of the easiest ways to offset deflation risk and make the currency lower is direct intervention.
This is also good for Eastern Europe which has significant liabilities in CHF. This will relieve some of the key pressure in this financial crisis.
The key issue to watch is to see whether this will be a policy followed by other central banks whereby we get into a war of competitive devaluations.
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