Posted On: November 12, 2010
The Swiss National Bank has taken a major hit to its finances as it strives to keep down the price of the national currency, the Swiss franc. In the first three quarters of 2010, the SNB reported a paper loss of 8.5 billion Swiss francs - $8.7 billion on assets denominated in foreign currencies like the dollar and the euro.
Switzerland's money has traditionally been regarded as a safe-haven asset; until relatively recently, it was one of the few gold-backed currencies in the world, and its central bank has typically been regarded as a model of fiscal probity. But with the global forex markets in turmoil, high demand for the Swiss franc has driven up the price of the currency.
That makes Swiss exports - like Nestle chocolate and coffee - more expensive, and thus less competitive. So the government has been stepping in, trying to push down the currency by buying up others, like the euro and British pound.
"We can't exclude that inflation could temporarily turn negative at the beginning of 2011," SNB governing board member Jean-Pierre Danthine said at an event in Geneva last week. "If the downside risks to the economy materialized and then translated into a deflation risk, the SNB would take all measures needed to ensure price stability."
Category: Industry News
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