The Swiss Franc Is Collateral Damage From Market Chaos

Sympathy doesn’t come easily for a country as wealthy as Switzerland, but the continued strength of its currency should stir some compassion. The franc has gained more than 3% against the euro and almost 2% versus the dollar this year as investors flock to it as a haven in troubled times. That leaves policymakers torn between standing pat and seeing exports damaged, or trying to subdue its gains and risk accusations from jealous trading partners of currency manipulation. A return to negative official interest rates may become unavoidable.

According to Bloomberg News, Karsten Junius, chief economist at Bank J. Safra Sarasin, reckons that on Monday the Swiss National Bank made good on its March 2 commitment to intervene and sell francs in the open market if its currency continued to appreciate versus the euro. Ninety cents to the euro looks like the line in the sand; the sudden weakness of the euro since the Iran war started is forcing the Swiss central bank’s hand, but it knows from hard experience that there’s a limit to how effective intervention can be.