by © Wirojsid | Dreamstime On 24 July 2017, the Swiss franc was 1.101 to the euro. One week later on 31 July 2017 it was 1.145, according to Bloomberg. Over the month it dropped from 1.095 to 1.145, a drop Reuters described as the biggest monthly drop in six years. The Swiss National Bank (SNB) has ...
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© Wirojsid | Dreamstime
On 24 July 2017, the Swiss franc was 1.101 to the euro. One week later on 31 July 2017 it was 1.145, according to Bloomberg. Over the month it dropped from 1.095 to 1.145, a drop Reuters described as the biggest monthly drop in six years.
The Swiss National Bank (SNB) has been working hard to bring down the value of the Swiss franc. Speaking to the newspaper Le Temps last week, SNB president Thomas Jordan described the currency as “significantly overvalued”.
But why has the franc weakened now?
According to Bloomberg, the currency’s slump seems to have been triggered by a number of factors including an excess of francs in the system. Commerzbank AG said the SNB could be selling the franc. The SNB has been adding assets to its balance sheet for some time, putting more francs into the market. Toshiba Corporation selling its stake in Swiss company Landis Group AG could have contributed to the supply of the currency.
“The SNB may have seized the opportunity and intervened in a thin, risk-positive market into an upmove so as to drive up EUR/CHF at a low cost, as the SNB is still of the view that the franc is overvalued”, said Commerzbank in a note to clients.
UBS thinks the franc could fall to 1.14 in six months and 1.16 in 12 months. In comments to Bloomberg Thomas Flury, head of currency strategy at UBS Wealth Management’s Chief Investment Office, said “in the short term, it is very well possible that the exchange rate spikes well above these levels.”
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