The Swiss MayhemHistory of Swiss FrancSwiss Franc or CHF has
always been investors safe havenStable GovernmentWell Balance
BudgetHigh GDP Does not involve in Quantitative EasingHas been
banker of the world for many yearsExport of goods, services and
tourism = 70% of its GDP
Investors GreedInvestors Demand for CHF Market value of CHF
Swiss Exports () becomes expensive Tourism () becomes expensiveSNBs
SolutionReferendum 2009Introduced exchange rate peg (Sept 2011)
Artificially brought down the value to CHF 1.2 /
SNB Currency Holding vs. GDP
SNBs dramatic decisionSwiss were angry that SNB has been piling
up huge FX reserve ($ 480 Billion)Several Euro Zone countries have
been expecting ECB to get into Quantitative Easing for Euro supply
in market => value of Euro goes down => SNB again prints more
Franc to maintain the cap implies CHF Cheaper Franc implies higher
export to US and IN (20% of Swiss exports)SNB lifted the cap of
fixed rate against on January 15, 2015
The Final Outcome
Markets Caught offguardSNB stopped controlling CHFSupply of CHF
fellAlso impacted $ and which in turn impacted other currencies
globallyHuge losses to banks and customers till the currency
stabilized again
