Swiss Currency Devaluation Explained
Switzerland is one wrong move from being labelled a currency manipulator by the United States. It’s true. The Swiss National Bank (central bank) is openly devaluing the Franc, and here’s why, because if you can’t trust a Swiss banker, what’s the world come to?
If the American people demand Swiss cheese, it’s got be bought from Switzerland in Switzerland’s native coinage. The USA exchanges its dollars for francs, and then does the trade. But if the USA can exchange its dollars for more Francs (because Francs are worth less), then it can buy more cheese. If more cheese is shipped, that means more cheesy jobs in Switzerland.
It’s cunning, real cunning, but the Swiss don’t seem too good at this. In spite of aggressive foreign exchange interventions, the Swiss Franc is still gaining on the USD. You need to look at the USD/CHF chart. It’s going down. The Swiss want it going up to show that each incremental dollar is able to purchase more incremental Francs!
It’s funny – even the Invstr community is betting it’ll keep going down. The USD/CHF currency pair is 11% short-sold. You can join in trading currencies on the Forex market, which is open around the clock. The returns are slow coming and it’s a day trader’s paradise, but its where big shifts in global economic strength can be observed over time.
The official reclassification of Switzerland to ‘currency manipulator’ could cause other nations to lose confidence in the Swiss Franc. Ironically, that could cause the tumble that helps Switzerland inflect that chart, if people still want cheese. Is this a hidden catalyst?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
