Amid the global recession, and fiscal crises, demand for the Swiss Franc has grown like crazy.While the eurozone tanks and investors start getting shifty about the dollar, experts talk about the franc as a “gold proxy.” Gold has also been through the roof lately, despite falling in the last two days.
A stable economy based on recession-proof industries, low unemployment, and conservative monetary policy are just a few reasons everyone’s in a frenzy over the franc.
- The Swiss system of direct democracy calls for referendums on all important laws, and any Swiss citizen can propose a constitutional amendment.
- The federal government has historically rejected alliances that might entail military, political, or economic action. It refused to join the U.N. until 2002.
The Swiss constitution requires that the government retain gold reserves. The country's ratio of gold to foreign exchange reserves is now on par with the United Kingdom.
A Globe and Mail article reported in July that 'experts don't expect the central bank to try to halt the currency's rise any time soon.' This means that investors could bet on continuing appreciation -- at least until now.
- Since the country is highly dependent upon exports, increasing appreciation could compromise the Swiss economy.
- The tourist industry has taken a beating, with rooms in the French Alps 30 per cent cheaper than those in the Swiss Alps this year.
- The SNB could have enough power to pull it off.
- The franc has fallen sharply against the dollar since the peg was announced, even though experts don't think the SNB will actually go ahead with the plan. That said, the USD/CHF is still up on the day.