SNB Prepares for Brexit Chaos Amid Growing Tensions

The Swiss Franc has always been a safe haven for investors during times of uncertainty and hardship. Fears of a British exit from the European Union isn’t likely to be an exception to this rule. Investors have already started to look to the CHF from safety as we get closer to the June 23 referendum. The Swiss National Bank said it was ready and monitoring the situation round the clock to prevent a new rally of its currency.

On June 16, the SNB held its interest rates at a negative 0.75 percent, as was expected by most analysts. It also renewed its commitment to step in and intervene if the situation required it.
Today, the CHF is still overvalued and causes exporting SMBs to struggle as they attempt to keep with EU competitive pricing.

“Fundamentally, we have room to maneuver on these two instruments,” Jordan said, speaking of interest rates and market interventions. “In a first phase, should the situation arise, it will be about stepping in to markets in a stabilizing manner to prevent exaggerations.”

From its Singapore office, the Swiss central bank will keep a close eye on the markets and is said to be ready to react within minutes, if need be.

Fears of another parity (or worse) are still fresh in investor’s minds, and the SNB is said to be determined to defend a 1.05 level with all it has. Last year, the economy grew by less than 1 percent because of the strong franc.

“For many professionals and business people, the CHF/EUR question goes way beyond a simple asset management and forex question. It influences the very livelihood of many exporters of goods and services throughout the country. Everyone will be looking very closely at what will happen with Brexit”, explained Marwan Naja, CEO of Manixer, a Geneva-based private equity firm.

The SNB amassed a colossal $600 billion in foreign currencies, as it had pegged the franc to the euro at 1.2 between 2011 and 2014.
By Lovisa Alvin

Copyrighted 2016. Content published with author's permission.

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