Released on: August 19, 2011, 10:43 am
Author: Saxo Bank
Industry:
Financial
TradingFloor.com, the home of Saxo Bank's trading commentary, financial research and analysis, has released a video discussing the current dilemma involving the Swiss Franc.
The Swiss Franc has appreciated of late, and therefore so has the focus of what the Swiss Bank and the Swiss government will do to curb this strength, as it is hurting businesses and therefore the Swiss economy.
One of the steps which have been discussed the most is a peg to the Euro; however this is yet to happen, despite much speculation. With the attempts to weaken the currency's strength possibly only providing temporary relief, it is seen as only a matter of time before more extreme measures, such as a peg to the Euro, are taken.
Ken Veksler, senior manager, Trading Advisory at Saxo Bank discusses his opinions on the likelihood of a peg to the Euro and the effect the Swiss Franc dilemma is having on the Swiss economy.
Veksler believes that a peg to the Euro is an extreme measure, and the likelihood of that happening is fairly minimal. There was a successful attempt made in 1978, where the Swiss Franc was pegged to the German Deutschmark for around 18 months, however, Veksler thinks it will be unlikely that this extreme measure will be taken again, even though the scare in the market in recent days and weeks has made it more of a serious topic than previously thought.
The Swiss government would be unhappy to put a peg to the Euro in place because it would mean a loss of its position as an independent state within a wider UN zone, which they have prided themselves on for quite some time.
Veksler believes that if the peg did come into place the Swiss Bank would have to revert to printing money to allow themselves adequate reserves to put this sort of action into place. However, this is more of a band aid for the problem rather than a full term solution.
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