Analysis

Switzerland/EU: Overvalued Franc Hurting Swiss Industries
(FABRICE COFFRINI/AFP/Getty Images)
February 6, 2012
| Economics
| Europe
Summary
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The rapid rise in value of the Swiss franc (SFR) against the euro and other major currencies in the first nine months of 2011 clobbered Swiss industrial sectors. Yet despite the Swiss National Bank’s commitment to defend a SFR1.20 to €1 floor, exchange rates between the franc and other key currencies continue to appear overvalued.

Since the Swiss economy is very open and dependent on exports, a large overvaluation of the franc has major consequences for Switzerland.  Whether or not the Swiss National Bank can uphold its pledge to maintain its self-imposed exchange rate floor in the coming months will be key to avoiding a recession and deflation,

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