Swiss Franc and its changes in terms of currency to Euro
The Swiss National Bank has declared a new price against Euro facing the problems of rise and fall in the Swiss Franc. A peg between the European Union currency- the Euro and the Swiss currency was interpreted by the SNB. Currency pegging is not a new thing. The Bretton Woods agreement after the World War II made each currency pegged to the dollar and this form existed for centuries. The decision of the Swiss National Bank has changed from the past days. A debt crisis was faced by the European Union followed by the public debts which includes countries like Italy, Spain, Greece and Portugal. Each of them faces default possibility and they were collectively known as “PIGS”. In order to enforce the price ceiling and new peg for the Swiss Franc, the Swiss National Bank will finance and underwrite the crisis in Europe.
Fall of the Swiss Peg
Counting traders will quickly sell off all the Swiss Franc in just a minute or just in a day as a safe currency. About 8 percent was plunged against the Euro and about 9 percent or more was plunged against the US Dollar on 6th of September 2011.
Before the EURCHF pair new price ceiling, the Swiss Currency was used by the investors safely like a wealth store. And where the Euro was taken as a trouble currency therefore maximum exposure was given to Europe by the Swiss investments so that safety could be made in the European banking system that collapsed. The peg to Euro from Swiss currency changed the outlook day after day. In order to keep the currency low the Swiss Bank needs to buy maximum number of Euros using Swiss Franc.
The change of Swiss Franc to Euro
In order to keep the value of Franc lower than the Euro it is estimated that about $200 billion could be expanded by the Swiss National Bank. According to Bloomberg it is estimated that Swiss Central Bank spent $ 15 billion to stem Franc’s rise. With a rising percentage of 4.6 the Franc gained its value in the beginning than other developed nations. But in contrast the US Dollar lost it value 4 percent which was the worst performer in the world in global market of 10 currencies. Though the value of the Franc is not positive but many traders are happy by the enactment of Swiss National Bank keeping the value above 1.2 price ceiling.