Swiss Franc Alert

12 March 2009

I note that I continue to receive many visitors who are searching for information about the Swiss Franc, a currency I have generally held in high regard. However, there is bad news for the Swiss Franc today - though keep in mind that this is in large part because the currency remains fundamentally very strong!

Bill Fleckenstein made this comment today:

"However, the really big news emanated from the Swiss National Bank, which not only trimmed rates but said they intend to buy currencies to avoid franc appreciation. Said differently, they want to trash their currency. And, they wasted no time -- by actually entering the market to effect that trade. (Within hours, the Swiss franc was lower by about 4%.)

"So, anyone with money in Switzerland as a safe haven has to be a little bit concerned, as the Swiss are definitely playing the game of let's-debase-our-currency-to-the-bottom. In any case, the NZ/Swiss news helped gold and silver, which were up 1.5% apiece."

Why is the Swiss government seeking to pull the floor out from underneath its own currency? Exports represent over 50% of the previously thriving Swiss economy. The Swiss government anticipates a contraction in GDP this year on the order of 2.5-3%. The strong Swiss franc made Swiss exports too expensive to sell and made Switzerland itself too expensive for many tourists to visit -- dealing blows to two major sectors of the Swiss economy. Estimates for the decline in Swiss watch exports are now down from -10% to -14%. Swiss luxury goods maker Richemont missed third quarter forecasts, marking its most challenging quarter in over two decades. For more information, click here or here.

I have commented previously that in a financial crisis, gold is a better choice than the Swiss Franc. I continue to hold to this position. See my previous blog entry: "Gold Is Better Than the Swiss Franc."

Here is a list of my blog entries concerning the Swiss Franc:

1. Canadians, Buy the Swiss Franc Now!

2. The Swiss Franc Continues To Climb in Canadian Dollars.

3. My first compliment from Fleck.

4. Currencies 101.

5. Another Swiss Franc Buying Opportunity for Canadians.

6. All You Need To Know About Global Money Supply in One Place.

7. The Swiss Franc Is Still Strong.

8. Use "FXF" (CurrencyShares Swiss Franc Trust) To Buy the Swiss Franc.

9. Gold is Better Than the Swiss Franc.

10. Swiss Franc Alert.

11. Gold Isn't Gaining All That Much... In Canadian Dollars!
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