The Currency Converter

Archive for 2012

Swiss National Bank Maintains 1.20 Euro Exchange Rate Cap

Thursday, March 15th, 2012

The SNB has doubled its 2012 growth outlook and vowed to continue enforcing the EUR/CHF cap at 1.20. The central bank also held interest rates at 0%-0.25%.

By Josh Ferry Woodard

On September 6^th 2011 the Swiss National Bank set a minimum exchange rate of 1.20 Swiss Francs to the Euro to combat the Franc’s intense appreciation in value. The ongoing Greek sovereign debt crisis had spooked investors into selling the single currency, and the US economy was suffering from a similar vote of no confidence. Seeking a safe haven from the financial meltdown, investors pumped large amounts of Euros and Dollars into the Swiss currency.

The Big Mac index, which measures price parity between countries and currencies, indicated that the Swiss Franc was overvalued by 98% against the Dollar. This had an adverse effect on the Swiss economy; the Franc was so strong that export prices soared way beyond competitive levels. Swiss companies were posting terrible profits and many threatened to relocate outside of the country if the Franc’s value continued to inflate beyond its means.

The SNB responded by vowing to “buy foreign currency in unlimited quantities” to keep the Euro to Swiss Franc Exchange Rate above 1.20. Within 15 minutes the Franc lost 9% against the US Dollar and 8.8% against the Euro, stunning the currency exchange market.

Well that was then and this is now…

This morning the SNB almost doubled its growth outlook for 2012 from 0.5% to 0.8% growth: “There are growing indications that Switzerland’s economy is stabilising.” The SNB claimed that the exchange rate cap was a significant factor in their improved forecast: “While the high value of the Swiss Franc continues to present enormous challenges to the economy, the minimum exchange rate is having an impact. It has reduced exchange rate volatility and given business leaders a better basis for planning.”

The Swiss National Bank remains dedicated to buying foreign currency in unlimited quantities to maintain the EUR/CHF 1.20 exchange rate cap. Following the decision the Swiss Franc improved by 0.28% against the Euro, 0.40% against the Pound, and 0.58% against the US Dollar (11:38 GMT).

15^th March 2012 Swiss Franc Exchange Rates:

Today’s Euro to Swiss Franc Exchange Rate is 1.210

Today’s Pound to Swiss Franc Exchange Rate is 1.452.

Today’s Swiss Franc to US Dollar Exchange Rate is 1.079.

Category Swiss Franc

New Zealand Dollar Exchange Rate: New Zealand Dollar Rallies despite Dovish Central Bank Statement

Thursday, March 8th, 2012

By Josh Ferry Woodard

The New Zealand Dollar got off to a slow start this week as risk appetite deteriorated on the back of negative global financial news. US President Barack Obama issued an aggressive statement aimed at Iranian leaders, stoking fears that the US could be heading towards another war in the Middle East. Risk sentiment took another blow when Spanish Prime Minister Mariano Rajoy announced that Spain will miss its budget deficit target for this year, leaders in the Netherlands had a similarly negative outlook for their growth plan. This fuelled the flames of discontent surrounding the Eurozone economy as a whole, suggesting that growth within the 17-nation bloc could be stunted even more than initially expected.

Global markets slowed down considerably and as a result the commodity-correlated currencies such as the Kiwi and the Aussie suffered from investors’ flights to safety. The New Zealand Dollar lost out to all of the majors at the beginning of the week:

The Pound to New Zealand Dollar Exchange Rate increased from 1.918 to 1.938.

The US Dollar to New Zealand Dollar Exchange Rate grew from 1.211 to 1.226.

And the Euro to New Zealand Dollar Exchange Rate rallied from 1.599 to 1.615.

The Kiwi’s decline continued following the reserve Bank of New Zealand’s decision to leave the official cash rate at its record low 2.5% – the interest rate was not expected to change but central bank governor Alan Bollard spoke of the potential risks to economic growth posed by the New Zealand Dollar’s appreciation in the foreign exchange market.

Bollard described the NZD’s current strength as ‘detrimental to the tradable sector, undermining GDP growth, and inhibiting rebalancing in the New Zealand economy’. He predicted the kiwi could negatively impact the manufacturing and tourism industries; his intentionally dovish tone seemed to have been successful in weakening the currency as the New Zealand Dollar continued to spiral downwards immediately following the announcement.

However within a few hours, investors ignored the governor’s negative rhetoric and the Kiwi rallied back up towards the rates at which the week commenced. Global sentiment seemed to relax a little on the news that the Greek PSI bond swap deal was making progress and the demand for the New Zealand Dollar picked up again.

Despite Bollard’s dovish speech the Kiwi looks to be in a strong position; if the Greek debt deal goes well tonight expect risk sentiment to improve and NZD could rally further.

The current Kiwi rates are (as of 10:51 GMT):

Pound to New Zealand Dollar Exchange Rate – 1.911

US Dollar to New Zealand Dollar Exchange Rate – 1.209

Euro to New Zealand Dollar Exchange Rate – 1.598

Category New Zealand Dollar