The Swiss National Bank (SNB) shocked foreign exchange markets by setting a minimum exchange rate target of 1.20 Swiss francs to the euro yesterday, saying it would enforce it by buying foreign currency in unlimited quantities.
The move immediately knocked about 8 percent off the value of the Swiss franc, which had soared as investors used it as a safe haven from the eurozone’s debt crisis and stock market turmoil.
“The current massive overvaluation of the Swiss franc poses an acute threat to the Swiss economy and carries the risk of a deflationary development,” the central bank said in a statement. “With immediate effect, it will no longer tolerate a euro-Swiss franc exchange rate below the minimum rate of SF1.20. The SNB will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities.”
The bank added that even at a rate of SF1.20 to the euro, the franc was still too high and that it should continue to weaken.
“If the economic outlook and deflationary risks so require, the SNB will take further measures,” the bank said.
Soon after the announcement, the euro was trading at just above the SF1.20 target after earlier being at about SF1.10. The euro also rose against the US dollar and was trading at US$1.417.
“One will think twice about speculating against this target because the SNB is with its back against the wall. They’ve exploited all other options,” said Alessandro Bee, an economist at Bank Sarasin. “Short term its clearly positive because Swiss exporters get supported. Longer term, you could say it bears inflationary risks.”
The Swiss franc nearly touched parity with the common currency on Aug. 9. It fell 8.5 percent against the euro after the announcement to SF1.203 and also dipped almost 8 percent against the US dollar to US$0.8483.
To cushion the economy from a downturn as the strong Swiss franc hurts exports, the central bank cut an already low interest rate target to nil on Aug. 3. It is also boosting the amount of liquidity in the banking system and it had threatened further steps. Those measures had temporarily helped the franc weaken, falling about 18 percent to a seven-week low, but it jumped again last week as worries about the health of the global economy intensified, increasing pressure on the central bank to act again.
DEFENDING DEMOCRACY: Taiwan shares the same values as those that fought in WWII, and nations must unite to halt the expansion of a new authoritarian bloc, Lai said The government yesterday held a commemoration ceremony for Victory in Europe (V-E) Day, joining the rest of the world for the first time to mark the anniversary of the end of World War II in Europe. Taiwan honoring V-E Day signifies “our growing connections with the international community,” President William Lai (賴清德) said at a reception in Taipei on the 80th anniversary of V-E Day. One of the major lessons of World War II is that “authoritarianism and aggression lead only to slaughter, tragedy and greater inequality,” Lai said. Even more importantly, the war also taught people that “those who cherish peace cannot
STEADFAST FRIEND: The bills encourage increased Taiwan-US engagement and address China’s distortion of UN Resolution 2758 to isolate Taiwan internationally The Presidential Office yesterday thanked the US House of Representatives for unanimously passing two Taiwan-related bills highlighting its solid support for Taiwan’s democracy and global participation, and for deepening bilateral relations. One of the bills, the Taiwan Assurance Implementation Act, requires the US Department of State to periodically review its guidelines for engagement with Taiwan, and report to the US Congress on the guidelines and plans to lift self-imposed limitations on US-Taiwan engagement. The other bill is the Taiwan International Solidarity Act, which clarifies that UN Resolution 2758 does not address the issue of the representation of Taiwan or its people in
US Indo-Pacific Commander Admiral Samuel Paparo on Friday expressed concern over the rate at which China is diversifying its military exercises, the Financial Times (FT) reported on Saturday. “The rates of change on the depth and breadth of their exercises is the one non-linear effect that I’ve seen in the last year that wakes me up at night or keeps me up at night,” Paparo was quoted by FT as saying while attending the annual Sedona Forum at the McCain Institute in Arizona. Paparo also expressed concern over the speed with which China was expanding its military. While the US
‘FALLACY’: Xi’s assertions that Taiwan was given to the PRC after WWII confused right and wrong, and were contrary to the facts, the Ministry of Foreign Affairs said The Ministry of Foreign Affairs yesterday called Chinese President Xi Jinping’s (習近平) claim that China historically has sovereignty over Taiwan “deceptive” and “contrary to the facts.” In an article published on Wednesday in the Russian state-run Rossiyskaya Gazeta, Xi said that this year not only marks 80 years since the end of World War II and the founding of the UN, but also “Taiwan’s restoration to China.” “A series of instruments with legal effect under international law, including the Cairo Declaration and the Potsdam Declaration have affirmed China’s sovereignty over Taiwan,” Xi wrote. “The historical and legal fact” of these documents, as well
RSS