Switzerland hits back at currency speculators

Globe and Mail
Aug. 04, 2011

Can you imagine if a public corporation did this? "Too many people are buying our stock, so we're going to ruin its value by diluting the shares." There would be outrage. Central banks do it and the media hails it as "fighting back" against "speculators." - Chris, InfoLibThe head of the Swiss National Bank oversees an economy that counts on exports to generate half its gross domestic product. He also overseas a currency that investors consider an asset that will hold its value during times of global economic strife. This is one of those times, and traders can only buy so much gold. They are piling into the Swiss franc, sending its value to record highs in recent days.

Mr. Hildebrand finally pushed back Wednesday. He dropped the central bank’s benchmark lending target to “as close to zero as possible” from 0.25 per cent and also signalled that it would inject the equivalent of $104-billion (U.S.) into the Swiss economy.

Predictably, the franc fell -- by as much as 3 per cent against the euro, reversing some of the 10 per cent gain over the past two months. That’s why central bankers are so circumspect: they rely on shock value. Investors were taken totally by surprise because Mr. Hildebrand had been fully engaged in unwinding pervious stimulus measures that were directed at controlling the value of the currency

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