Swiss Franc Rises After Switzerland Gets to US ‘Watchlist’

Swiss Franc’s Exchange Rate Climbs

                Swiss franc exchange rate against the euro was close to three-year high after the announcement of the US Treasury. Price was around CHF1.08, but is expected to further rise in next days, especially if the SNB decided to limit its intervention actions after being warned by the US.

SNB Defends Its Actions

                According to experts, the move serves as a warning to the Swiss National Bank. Markets now expect that the SNB would limit its interventions on currencies and stop some aggressive moves aimed at capping CHF exchange rate, which is overvalued according to the SNB. The SNB hit the path of capping CHF gains in December as it committed to intervene on foreign exchange rates’ market as long as it is necessary. After Switzerland was added to US watchlist, the SNB stepped forward to defend its actions, claiming interventions were transparent, “motivated purely by monetary policy . . . aimed at addressing the negative consequence for inflation and the economy through a highly valued franc” and that they were not conducted with the aim to give “Switzerland advantages by undervaluing the Swiss franc.” The SNB intervention programme resulted in the bank having around CHF770 billion of foreign currencies with foreign stock portfolio at CHF150 billion, making the country eighth-largest investor in equity in the world. The Swiss bank is also keeping the record low interest rates, at minus 0.75%, for five years now, in a bid to stop overvaluation of CHF.

Second Time on US Watchlist

                Switzerland is already second time on such watchlist. Firstly, it was added in 2016 when it scrapped the euro peg, but two years alter the US treasury removed it from its list. Other countries on US watchlist include Japan, Vietnam, Malaysia, Singapore, Korea and also European countries, like Germany, Italy, Ireland, even though they do not have control over their fiscal policy, as they are in eurozone where the European Central Bank decides on rates and interventions on the common currency.