There were shock waves in the international currency markets today with the news that the Swiss National Bank had abandoned the cap they had placed on the swiss franc since Sept 2011.
The Bank had aggressively intervened since then to keep the franc ‘pegged’ at 1.2 Euro. Today they threw in the towel, and the franc shot up 15% against most major currencies. Why? Well, since the 2008 crisis everyone with money had gone to Swiss banks with it.
The situation today though, may make the Swiss, or those with Swiss bank accounts, feel ‘richer’,but the move is universally bad for business and tourism in Switzerland. Food giant Nestle’s stock is down by 15%. As one analyst noted, it’s as if the state of Virginia here in the USA has a dollar that’s worth 15% more than anywhere else in the country. Would people travel there, or buy goods and services there – that’s 15% more expensive across the board? Not if they had other choices, or if they are on a budget.