So in 2015 the value of the Swiss Frank sudenly increased dramiatically. All I know is that the Bank of Switzerland removed a cap on their exchange rate and this caused the rise but like, how? How is it possible to just suddelnly be like “oh actually this currency is now worth much more than is was last year”?
Edit: Typos
In: Economics
The swiss national bank used to buy massive amounts of Euro before it eventually stopped the pegging in 2015. by buying EUR (and probably other currencies like USD and stocks, bonds in such currencies, etc.) it weakened the CHF. Essentially they printed lots of CHF and „handed it out“ (by buying stuff) to other people/institutions.
If you control a currency and flood the market with said currency this will weaken the currency.
If the fed were to hand every US citizen 1 million usd, this would probably also weaken the dollar. If everyone has tons of money, sellers can charge more. Also something becomes less valuable if it is ubiquitous.
The Swiss National Bank was previously committed to artificially keeping their currency pegged to the Euro by buying Euros every time CHF/EUR went over 1.2. When they decided to stop doing this, the currency was allowed to normalize to the range where it would naturally have been sitting.
Latest Answers