The franc has to fall

The Swiss National Bank has informed that the devaluation of the franc may cause deflation and a crisis of the national economy.

On Tuesday, September 6th, the Swiss National Bank (SNB) has made a statement in which it informed that the value of the franc has to be reduced. The devaluation of the franc may be a threat to the national economy and lead to deflation. The first move towards the devaluation was fixing the limit of the relation of euro to the franc on the level of 1,2. Secondly, SNB announced that in order to maintain this level it is ready to buy any amount of foreign currencies. In practice, it means that probably a bigger amount of the Swiss currency will be printed.

The reactions caused by SNB announcement on the stock exchange were violent. The franc rate fell immediately. In just a few hours the EUR/CHF ratio increased from 1,10 to 1,20. The American dollar and Polish zloty have strengthened as well. On the Tuesday afternoon, the franc rate has fallen from 3,84 PLN to 3,5 PLN. For the borrowers who ran up a debt in francs this means that their monthly installment will be reduced by even a few hundred zlotys. According to the analysts, we should expect big fluctuations in the nearest future.

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