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Ups and Downs Why a central bank hates a safe haven

The Swiss franc has traditionally been a safe haven for investors in times of crisis. Why exactly has the Swiss National Bank been doing everything it can to sully the currency's reputation? (Michele Andina & Matthew Allen, swissinfo.ch).

The banking crash of 2008 plunged several countries into stagnation or recession. Investors looked for a place that would preserve what assets they had left. People scrambled out of the euro and the US dollar and into the Swiss franc. This quickly had a dramatic effect on exchange rates. By the end of 2009 the euro had dropped below CHF1.50. Swiss exporters saw the price of their goods rise, making them less competitive in their main market of Europe.

To make matters worse, the Swiss franc was also appreciating against the US dollar. In the autumn of 2010 $1 cost less than CHF1. The Swiss National Bank (SNB) decided to act. It printed Swiss francs and used them to buy up euros in an attempt to stop the franc from appreciating too strongly. This came at a cost. The SNB policy was increasingly criticised for being too unstable and risky.

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