I am curious too! It’s time to run with money to Switzerland?!
You guys manage your currency and your economics correctly, Us we use the magic printer and we don’t raise interest rate.
I have learned that everytime our swiss franc goes up to the Euro, shit will hit the fan and some catastrophe is incoming that we have to work with and work more etc….
Happened too many times in my 26 years
Proportionally, covid stimulus spending increased the Swiss money supply much less than it did in the EU. For the EU money supply increase was about 12% for 2020. Was about 8% in Switzerland, and also leveled out in 2021.
SNB gonna buy some EUROs again and things will be fine
The Swiss franc is known to be a safe haven currency. The more shit goes down around the world, the stronger it gets.
If you look long term at the CHF, you see that it has been getting stronger vs. All the other large currencies, mainly because it is considered a save haven currency.
In order to keep it artificially low the SNB introduced negative interest rates of 0.75% in 2015. Furthermore, they printed like a trio of CHF but unlike other countries who bought their own treasury bills etc. with the printed money, the SNB converted it to EUR and USD (mostly) and bought random securities. This is why the SNB sits on a almost CHF 1trio balance sheet.
Given the massive inflation in our trading partner countries the SNB decided it would be fine to hike interest rates from -0.75 to -0.25. However, the ECB remains at -0.5 (because Italy etc.).
So now investors get to decide to either keep their money in EUR and pay 0.5 on their money and they have the risk of something going off the rails (Italy etc.) or they can put it in CHF and only pay 0.25 on their money and (imo) have less risk of something going off the rails.
* SNB has raised interest rates, ECB has not done this yet
* Swiss wage growth is lower than wage growth in the Eurozone, so the SNB can allow to let the CHF strengthen a bit without losing competitiveness
* The usual geopolitical risk/safe haven story
As the world’s economies destabilise investors look for places to keep assets safe. That pushes up the value of the CHF.
This is bad for our export economy.
Previously the SNB had kept a negative interest rate for foreign deposits to discourage this behaviour. Now with new interest rates from the SNB, that pressure is reduced so the CHF again is gaining significant attention as a safe haven for assets.
I am interested to see what the SNB will do about it.
Dumb American here… I’m working in Switzerland for the summer, getting paid in CHF. How do I make the most of the exchange the exchange rate vs USD?
I recommend reading what the SNB said on the 16.6.
* The ECB still printing money even with this inflation
* the SNB hiked rates from -0.75 to -0.25
* the SNB said they will do what they need to stop inflation in CH, in particular they said about selling Forex (they hold a lot of US stocks but said nothing about those)
Explanation (actual):
The Swiss National Bank (SNB) has raised interests by 0.50%, a massive climb since long. This has caused for the CHF to gain value in general.
Reason why the EZB (European Central Bank) can’t raise interests:
-> Raising interests makes it harder for the poorer EU countries to pay their debt.
-> Not raising interests affects the northern EU states with inflation.
Another cause of the devaluation of the EUR is the bankruptcy of countries (e.g. Greece) and printing money. Printing money devaluates any currency (inflation).
Offtopic:
my brother and his family live in Switzerland while the rest of the family is in Hungary.
We’d be really happy if HUF:EUR would be 1:1 and not HUF404 : 1EUR.
As we say lately 404 Forint not found.
Well it should have been like that in the past but the SNB was doing its best to keep the swiss franc value down. Our economy relies on exporting goods, if the swiss francs rises to high we become to expensive for the foreign market. The war in ukraine and the economic crisis that is coming stresses the market. USD, CHF and yen are seen as safe currencies and are therefore heavily invested in thus raising their price. SNB is doing its best to mitigate those effects on the value of the currency but this explains the big fluctuations you’re seeing on the graph.
I guess your Swiss money printing press must be running slower than Euro money printing press.
* CHF is a safe haven currency, alongwith USD and JPY (albeit the current global environment has changed a few parameters here and there).
* When the overall global outlook is high-risk, people usually go here. Currently JPY is not holding its ground because of their very loose monetary policy and large difference between bond prices between the US and them.
* USD IS holding its ground because of their bullish outlook on tackling inflation (i.e. raising rates).
* CHF also raised their interest rates a couple of weeks ago. Even if its still negative, it had a large impact on strengthening the currency because it was a move taken after a couple of decades, which makes this safe haven currency more enticing.
* EUR on the otherhand is not raising their rates yet (or at all maybe) AND its geo-econo-political atmosphere is currently riddled with war, energy price crisis, etc.
Hence . . . CHF +, EUR –
All what has been said below already below, and also the SNB acutally in the past did buy Euros to keep the Euro stronger than the CHF (at one time the commitment was to keep it at min. 1.20CHF with one of the main reasons being a strong CHF makes export more difficult, and we’re already an expensive country) – now the SNB doesn’t do this anymore to my knowledge. With inflation being high all around in the EUR countries, and not so high in CH, the value of 1 EUR decreases compared to 1CHF
so how can (I) an average retail investor could profit from this, assuming the rest of the world goes of the rails or something.
because the European Union is not doing very well
In uncertain times, certainty is expensive.
One factor is that the swiss franc is still somewhat supported by gold and they dont print money at the rate that the euro is printed at.
SNB raised the interest rates to signal that it is serious about fighting inflation, even though inflation is still quite low in Switzerland. I wonder if the SNB has lost confidence of the Eurozone, as they otherwise always waited for ECB to act.
At the same time, the ECB has lost a lot or all their credibility as they are printing more money to save Italy, even though inflation is getting out of control. We basically have a rerun of the eurocrisis in 2009 x 10.
Inflation of 10 or so in Spain
Most people seem to miss the point that Switzerland has a reverse valuation problem compared to most other advanced economies: Precisely because it is actually small but has a massive emphasis on domestic stability, it is a safe haven currency. The downside then is that in large scale global economic crises, when investors seek to park their currency in a safe place, a tsunami of money wishes to buy Swiss francs to save the comparative valuation of the amount through the crisis. That leads to a (potential, expected) massive rise in the valuation of Swiss Francs that is actually *much* bigger than the valuation would be in terms of trading terms of pure consumption/import/export relations.
Therefore the Swiss central bank has to walk a fine line between balancing the valuation of their currency for Swiss exporting companies (that have to pay wages in local currency). If the CHF rises too high, the comparative cost of a work hour in Switzerland is so high that the exporting of the product is untenable, the companies go bankrupt as their export markets breakaway, while foreigners park massive amounts of money in Swiss banks that have nowhere to invest them. The Swiss economy would thus be slowly turned into a country with massive amounts of money on paper and high living standards, while it becomes more and more impossible to actually run a (globally competitive) business there. Hence the negative interest rates in Switzerland over the past few years: Switzerland has the luxury problem *to have to keep away some of the money trying to rush in.*
The strategy to compensate here is to then print Swiss Francs, buy foreign currencies or assets and thus keep the Swiss Franc *lower* than it otherwise would be. Once the crisis subsides and the investors leave Switzerland again for faster growing markets, the drop in value of Swiss Francs could again massively hit the economy in a reverse action, driving the cost of imports up so suddenly that businesses then face a storm from the other direction. In that moment, the Swiss central bank will need large amounts of foreign currency to buy back Swiss Francs from the currency markets and stabilize the value again. Which is, wisely, what they are prepared for. Hence they will keep a large amount of money (in foreign assets) in their balance *without* paying that out to the Kantons for consumption programs. As the past decade has shown, none of these valuation swings will last too long: the basic economic setups of EU and Switzerland have not changed as drastically as these swings suggest.
Will the CHF be getting stronger in the neae future or is it save to buy EUR now?
Along with what others have said. Specifically today the Swiss government announced a very small spending budget.
The EU has a higher inflation than CH.
The ECB doesn’t react properly against the way of the 2% of its current inflation.
That’s why people run into CH.
It will not drop massively near 0.90 especially as soon the ECB will increase the interest rates.
Can someone tell me if this is good for CH people spending in EU or EU people spending in CH? I’m bad with number this confuses me all the time.
There is no understating currencies. It’s just numbers that go up and down. So many factors that affect it and emotions. Don’t pay too much attention. What I can almost guarantee is that you go on holiday to Europe and need the euros, then the chf will crash 🙂
Yeah well it does not describe the issue wrt to increasing interest rates. Namely the USD is positive now and has hinted at further increases. Meaning that the USD should be getting stronger.
Also the weakness is quite sudden, meaning something else is going on. By sudden weakness I mean the CHF went weaker (quite a bit wrt to USD), then all of the sudden turned stronger. I think what is going is that the SNB is unwinding its trades. The SNB has a huge stock portfolio, which IMO was a big freaken mistake since central banks should not be gambling casinos.
I think they are trying to lock into profits because they see the writing on the wall that the stocks are heading down with the stronger interest rates. If the SNB stock portfolio were to drop 30% that would not be funny…
30 comments
I am curious too! It’s time to run with money to Switzerland?!
You guys manage your currency and your economics correctly, Us we use the magic printer and we don’t raise interest rate.
I have learned that everytime our swiss franc goes up to the Euro, shit will hit the fan and some catastrophe is incoming that we have to work with and work more etc….
Happened too many times in my 26 years
Proportionally, covid stimulus spending increased the Swiss money supply much less than it did in the EU. For the EU money supply increase was about 12% for 2020. Was about 8% in Switzerland, and also leveled out in 2021.
https://tradingeconomics.com/switzerland/money-supply-m3
https://tradingeconomics.com/euro-area/money-supply-m3
SNB gonna buy some EUROs again and things will be fine
The Swiss franc is known to be a safe haven currency. The more shit goes down around the world, the stronger it gets.
If you look long term at the CHF, you see that it has been getting stronger vs. All the other large currencies, mainly because it is considered a save haven currency.
In order to keep it artificially low the SNB introduced negative interest rates of 0.75% in 2015. Furthermore, they printed like a trio of CHF but unlike other countries who bought their own treasury bills etc. with the printed money, the SNB converted it to EUR and USD (mostly) and bought random securities. This is why the SNB sits on a almost CHF 1trio balance sheet.
Given the massive inflation in our trading partner countries the SNB decided it would be fine to hike interest rates from -0.75 to -0.25. However, the ECB remains at -0.5 (because Italy etc.).
So now investors get to decide to either keep their money in EUR and pay 0.5 on their money and they have the risk of something going off the rails (Italy etc.) or they can put it in CHF and only pay 0.25 on their money and (imo) have less risk of something going off the rails.
* SNB has raised interest rates, ECB has not done this yet
* Swiss wage growth is lower than wage growth in the Eurozone, so the SNB can allow to let the CHF strengthen a bit without losing competitiveness
* The usual geopolitical risk/safe haven story
As the world’s economies destabilise investors look for places to keep assets safe. That pushes up the value of the CHF.
This is bad for our export economy.
Previously the SNB had kept a negative interest rate for foreign deposits to discourage this behaviour. Now with new interest rates from the SNB, that pressure is reduced so the CHF again is gaining significant attention as a safe haven for assets.
I am interested to see what the SNB will do about it.
Dumb American here… I’m working in Switzerland for the summer, getting paid in CHF. How do I make the most of the exchange the exchange rate vs USD?
I recommend reading what the SNB said on the 16.6.
https://mobile.twitter.com/SNB_BNS
in summary:
* The ECB still printing money even with this inflation
* the SNB hiked rates from -0.75 to -0.25
* the SNB said they will do what they need to stop inflation in CH, in particular they said about selling Forex (they hold a lot of US stocks but said nothing about those)
Explanation (actual):
The Swiss National Bank (SNB) has raised interests by 0.50%, a massive climb since long. This has caused for the CHF to gain value in general.
Reason why the EZB (European Central Bank) can’t raise interests:
-> Raising interests makes it harder for the poorer EU countries to pay their debt.
-> Not raising interests affects the northern EU states with inflation.
Another cause of the devaluation of the EUR is the bankruptcy of countries (e.g. Greece) and printing money. Printing money devaluates any currency (inflation).
Offtopic:
my brother and his family live in Switzerland while the rest of the family is in Hungary.
We’d be really happy if HUF:EUR would be 1:1 and not HUF404 : 1EUR.
As we say lately 404 Forint not found.
Well it should have been like that in the past but the SNB was doing its best to keep the swiss franc value down. Our economy relies on exporting goods, if the swiss francs rises to high we become to expensive for the foreign market. The war in ukraine and the economic crisis that is coming stresses the market. USD, CHF and yen are seen as safe currencies and are therefore heavily invested in thus raising their price. SNB is doing its best to mitigate those effects on the value of the currency but this explains the big fluctuations you’re seeing on the graph.
I guess your Swiss money printing press must be running slower than Euro money printing press.
* CHF is a safe haven currency, alongwith USD and JPY (albeit the current global environment has changed a few parameters here and there).
* When the overall global outlook is high-risk, people usually go here. Currently JPY is not holding its ground because of their very loose monetary policy and large difference between bond prices between the US and them.
* USD IS holding its ground because of their bullish outlook on tackling inflation (i.e. raising rates).
* CHF also raised their interest rates a couple of weeks ago. Even if its still negative, it had a large impact on strengthening the currency because it was a move taken after a couple of decades, which makes this safe haven currency more enticing.
* EUR on the otherhand is not raising their rates yet (or at all maybe) AND its geo-econo-political atmosphere is currently riddled with war, energy price crisis, etc.
Hence . . . CHF +, EUR –
All what has been said below already below, and also the SNB acutally in the past did buy Euros to keep the Euro stronger than the CHF (at one time the commitment was to keep it at min. 1.20CHF with one of the main reasons being a strong CHF makes export more difficult, and we’re already an expensive country) – now the SNB doesn’t do this anymore to my knowledge. With inflation being high all around in the EUR countries, and not so high in CH, the value of 1 EUR decreases compared to 1CHF
so how can (I) an average retail investor could profit from this, assuming the rest of the world goes of the rails or something.
because the European Union is not doing very well
In uncertain times, certainty is expensive.
One factor is that the swiss franc is still somewhat supported by gold and they dont print money at the rate that the euro is printed at.
SNB raised the interest rates to signal that it is serious about fighting inflation, even though inflation is still quite low in Switzerland. I wonder if the SNB has lost confidence of the Eurozone, as they otherwise always waited for ECB to act.
At the same time, the ECB has lost a lot or all their credibility as they are printing more money to save Italy, even though inflation is getting out of control. We basically have a rerun of the eurocrisis in 2009 x 10.
Inflation of 10 or so in Spain
Most people seem to miss the point that Switzerland has a reverse valuation problem compared to most other advanced economies: Precisely because it is actually small but has a massive emphasis on domestic stability, it is a safe haven currency. The downside then is that in large scale global economic crises, when investors seek to park their currency in a safe place, a tsunami of money wishes to buy Swiss francs to save the comparative valuation of the amount through the crisis. That leads to a (potential, expected) massive rise in the valuation of Swiss Francs that is actually *much* bigger than the valuation would be in terms of trading terms of pure consumption/import/export relations.
Therefore the Swiss central bank has to walk a fine line between balancing the valuation of their currency for Swiss exporting companies (that have to pay wages in local currency). If the CHF rises too high, the comparative cost of a work hour in Switzerland is so high that the exporting of the product is untenable, the companies go bankrupt as their export markets breakaway, while foreigners park massive amounts of money in Swiss banks that have nowhere to invest them. The Swiss economy would thus be slowly turned into a country with massive amounts of money on paper and high living standards, while it becomes more and more impossible to actually run a (globally competitive) business there. Hence the negative interest rates in Switzerland over the past few years: Switzerland has the luxury problem *to have to keep away some of the money trying to rush in.*
The strategy to compensate here is to then print Swiss Francs, buy foreign currencies or assets and thus keep the Swiss Franc *lower* than it otherwise would be. Once the crisis subsides and the investors leave Switzerland again for faster growing markets, the drop in value of Swiss Francs could again massively hit the economy in a reverse action, driving the cost of imports up so suddenly that businesses then face a storm from the other direction. In that moment, the Swiss central bank will need large amounts of foreign currency to buy back Swiss Francs from the currency markets and stabilize the value again. Which is, wisely, what they are prepared for. Hence they will keep a large amount of money (in foreign assets) in their balance *without* paying that out to the Kantons for consumption programs. As the past decade has shown, none of these valuation swings will last too long: the basic economic setups of EU and Switzerland have not changed as drastically as these swings suggest.
Will the CHF be getting stronger in the neae future or is it save to buy EUR now?
Along with what others have said. Specifically today the Swiss government announced a very small spending budget.
The EU has a higher inflation than CH.
The ECB doesn’t react properly against the way of the 2% of its current inflation.
That’s why people run into CH.
It will not drop massively near 0.90 especially as soon the ECB will increase the interest rates.
Can someone tell me if this is good for CH people spending in EU or EU people spending in CH? I’m bad with number this confuses me all the time.
There is no understating currencies. It’s just numbers that go up and down. So many factors that affect it and emotions. Don’t pay too much attention. What I can almost guarantee is that you go on holiday to Europe and need the euros, then the chf will crash 🙂
comment comment comment.. CHF is safe haven, thus investors comment comment comment…
Yeah well it does not describe the issue wrt to increasing interest rates. Namely the USD is positive now and has hinted at further increases. Meaning that the USD should be getting stronger.
Also the weakness is quite sudden, meaning something else is going on. By sudden weakness I mean the CHF went weaker (quite a bit wrt to USD), then all of the sudden turned stronger. I think what is going is that the SNB is unwinding its trades. The SNB has a huge stock portfolio, which IMO was a big freaken mistake since central banks should not be gambling casinos.
[https://www.fuw.ch/article/snb-schlaegt-bei-us-aktien-zu](https://www.fuw.ch/article/snb-schlaegt-bei-us-aktien-zu)
I think they are trying to lock into profits because they see the writing on the wall that the stocks are heading down with the stronger interest rates. If the SNB stock portfolio were to drop 30% that would not be funny…