Money in Motion

Is the Swiss Franc's Slide For Real?

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The Swiss franc is off sharply on rumors that the central bank is going to set a new, lower peg against the euro.

Maybe, maybe not.

Time was, the Swiss franc was one of those boring, safe currencies. But not these days. The Swissie tumbled over the last few weeks as the Swiss National Bank made clear its determination to stem the currency's dramatic rise. And today, it's tumbling again, on talk that the franc will be pegged against the euro at 1.25, below the current target level.

Not likely, says Marc Chandler, chief currency strategist at Brown Brothers Harriman.

Sure, the State Secretariat for Economic Affairs downgraded the economic outlook for Switzerland, and forecasts for export growth have also declined. But "They've had a lot of success already" in forcing the currency down, Chandler says, and you'd think the Swiss would want to see what effect that success will have.

Also, "If they change the peg now it would seem like they don’t have a consistent strategy," Chandler says. The Swiss might eventually decide that more pressure is needed, he says, but he doesn't think a change is imminent. For now, Chandler says, he's maintaining his year-end target for the Swiss franc against the euro  of 1.20.

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