Bank of Switzerland (SNB) sent Thursday shockwaves through the foreign exchange market by cutting its already negative rate, and to give up the binding of the Swiss franc against the euro (with a EURCHF floor at 1.20).
SNB chief Thomas Jordan also emphasized that the decision was not taken in panic.
– Currency floor was an exceptional and random measures protected Swiss economy, said Jordan including Dow Jones Newswires according Affärsvärlden.
Read also: New interest rate shock – Swiss Francs runaway
Currency floor ensured namely to protect Swiss exporters against loss of competitiveness by strengthening of the Swiss franc.
The protection is thus now gone, and the Swiss franc strengthened sharply Thursday against including the euro.
Swatch boss: A tsunami
When 56 percent of Switzerland’s exports go EU gets reactions therefore strong.
Swiss unions claim according to the Financial Times that Thursday’s grip from SNB will add a “massive” pressure on jobs and wages among exporters.
– Jordan is not only the name of SNB boss, but also a river … and today’s grip is a tsunami; for both export industries and tourism, and ultimately for the whole country, says Nick Hayek said.
He is CEO of the Swatch Group, one of the largest industrial companies and exporters in Switzerland.
Swatch Group and Richemont knocked down 16 percent on the Zurich Stock Exchange, which plunged 10 percent in Thursday’s trading.
The two biggest banks in Switzerland, UBS and Credit Suisse, both fell over 10 percent.
ABB tried however to lull effect of Swiss franc appreciation of, and has stated that the company has hedged against the strong currency.
Two industries that paralyzed
But tourism can do little to compensate a strong Swiss franc, and the sector is therefore harder hit than others, writes Financial Times.
Manufacturers of machinery will also paralyzed.
– The industry has a higher share of exports to Europe than for example pharmaceuticals and watches, so they will feel this much stronger body than more globally oriented companies, says chief economist «Swiss NHO” (Economiesuisse), Rudolf Minsch, told the newspaper.
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