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Euro and Swiss franc approach parity

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Euro and Swiss franc approach parity
Paul Papadimitriou
15:02 CEST+02:00

With the euro almost at parity with the Swiss franc, the Swiss National Bank has cut interest rates further this week and will significantly increase the supply of liquidity to the money market.

The rise of the Swiss franc has been making international headlines for weeks now, with the Swiss National Bank (SNB), government and businesses – especially exporters - all looking for ways to lower its value.

Switzerland’s strong economy, stable government, low interest rates and tiny public debt have caught the attention of investors looking for a safe haven, sending the Swiss franc to record highs against major currencies, to an extent that the exchange rates are now threatening the country's economy.

The euro briefly sank under 1.01 CHF on Wednesday and therefore practically reached parity with the Swiss franc. It recovered slightly again afterwards. The dollar was worth less than 71 Rappen before it also recovered. Both currencies have reached record lows against the Swiss franc, the Tages Anzeiger newspaper reported.

The SNB announced a cut in interest rates to "as close as possible to zero" a week ago and said it would very significantly increase the supply of francs to the money market over the next few days.

It added it would keep a close watch on developments on the foreign exchange market and take further measures if necessary to counter the rise of the franc, according to Reuters.

Despite the turmoil, it is not all bad news for the Swiss, with many reports of people travelling to nearby countries especially France and Germany to take advantage of the strength of the franc by paying for goods in euros.

 

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