Zurich dwarves wreak currency havoc

Swiss Open New Round in Currency War

RT

A new front in the global currency war has opened up, after Switzerland surprised international markets by devaluing its currency by 8.7 per cent in a single move. Zurich has bound its national currency to the euro.

The Swiss Franc has been rising steadily for over a year, as panicked investors looked for a safe place to weather the storms in the troubled US and European economies.

This rise caused the price of everyday items, such as food and clothes, to shoot up, making it cheaper for Swiss citizens to drive to Germany for their shopping.

The country's central bank says that, by pegging the Swiss Franc to the turbulent euro, it will protect them from rampant inflation. The bank will do massive market interventions to hold the exchange rate of the franc against the euro at least at 1.2 

But German economic analyst Michael Mross believes it is no more than a “total unconditional surrender” to Brussels bureaucracy.

“The Swiss franc devaluated by 10 per cent – it means everything will be 10 per cent more expensive in the future. What we saw in Switzerland is nothing but a coup of the Central Bank of Switzerland. If you asked a Swiss citizen if he wants to join the euro or not, he would clearly vote ‘no’.

 But they were not asked,” he told RT.

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Bloomberg,

7 September, 2011

Switzerland opened a new round in a global currency war as fading economic growth forces policy makers to step up efforts to spur expansion.

The Swiss National Bank’s decision yesterday to cap the franc’s rate for the first time since 1978 marked a bid to protect trade hurt by the currency that last month strengthened to records against the euro and the dollar. The franc plunged 8.1 percent yesterday against the euro, the most since the creation of Europe’s single currency. It was little changed at 1.2058 per euro at 10:53 a.m. in London.

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