Article: Flourishing Financially: Corporate Finance In Switzerland

Article - Media, Publications

Flourishing Financially: Corporate Finance In Switzerland

RHEA WESSEL, 02 April 2021

Switzerland is reasserting its reputation as a stable and resilient economy in times of turbulence. While markets elsewhere are concerned about overleveraged companies and ballooning public debt, credit and capital markets in Switzerland appear to be quietly ticking along with the reliability of a proverbial Swiss watch.

It is not for nothing that the country and its currency are considered among the safest of havens. After the Alpine republic and its internationally oriented companies weathered the 2008 global financial crisis, the Swiss National Bank (SNB) tackled the relentless appreciation of the Swiss franc by massively intervening in the currency market, opening Switzerland to accusations of currency manipulation.

But it worked. The SNB’s efforts stemmed the franc’s rise, protecting Swiss companies’ competitiveness and creating favorable funding conditions in the country. Corporate bond spreads hardly budged throughout the financial crisis, a stark contrast to the adverse environment CFOs faced in the eurozone and the US. Continue reading “Article: Flourishing Financially: Corporate Finance In Switzerland”

Article: Analysis: A currency manipulator tag for Switzerland may not deter FX approach

Article - Media, Publications

Analysis: A currency manipulator tag for Switzerland may not deter FX approach

Saikat Chatterjee, John Revill and David Lawder, 16 December 2020

LONDON/ZURICH/WASHINGTON (Reuters) – The threat of being named a currency manipulator by the U.S. Treasury may be an embarrassment for Switzerland, but even if the country does get the tag, it likely will have little effect on the Swiss National Bank’s monetary policy.

Switzerland is expected to meet all three criteria for such designation in the long-overdue U.S. Treasury report on the foreign currency practices of major trading partners. The Treasury has some discretion on whether to issue such a label, and the coronavirus pandemic, which has thrown trade and capital flows into chaos this year, could be a factor.

There would be no automatic punishment with a label, though U.S. law requires Washington to demand negotiations with designated countries.

Vietnam, Thailand and Taiwan this year have also been in violation of the Treasury’s three manipulation criteria: a $20 billion-plus bilateral trade surplus with the United States, foreign currency intervention exceeding 2% of GDP and a global current account surplus exceeding 2% of GDP.

Currency experts expect Treasury Secretary Steven Mnuchin to issue the report within days, just over a month before he leaves office.

“The subtle implication of being put on this list is that you eventually could come under sanctions, and that puts pressure on these countries not to weaken their currencies so much, or to allow strengthening,” said Win Thin, global head of Currency Strategy at BBH.

But he said that in Switzerland’s case, as the exchange rate is its main tool for fighting deflation, “they may say, ‘Well, tough’”.

The Swiss central bank is firmly under the Treasury’s focus after spending 90 billion Swiss francs ($101.50 billion) on foreign currency intervention in the first half of 2020 amid pandemic-driven safe-haven inflows.

The SNB has long argued it is not trying to weaken the franc to gain a trade advantage. Instead, it aims only to stem the appreciation of its currency to head off the threat of deflation, which runs contrary to its goal of price stability.

“Switzerland has always been treated as a special case when it comes to exchange rate policy and even the U.S. Treasury has conceded in the past that Switzerland’s economic situation is “distinctive” and that its monetary policy options are limited by its small stock of domestic assets,” said David Oxley, a senior European economist at Capital Economics.

Read Full Article

Article: FOREX-Bitcoin breaks $20,000 for first time, Switzerland named currency manipulator

Article - Media, Publications

FOREX-Bitcoin breaks $20,000 for first time, Switzerland named currency manipulator

Suzanne Barlyn, 16 December 2020

Bitcoin smashed through $20,000 for the first time on Wednesday while the Swiss franc gained after the U.S. Treasury labelled Switzerland a currency manipulator.

Bitcoin last jumped 6.9% to move as high as $20,651. The cryptocurrency has gained more than 170% this year, buoyed by demand from larger investors attracted to its potential for quick gains, purported inflation-resistant qualities, and expectations it will become a mainstream payment method.

“The latest run to $20,000 hasn’t been accompanied by nearly the amount of hype as there was back in 2017,” said Paul Hickey, co-founder of Bespoke Investment Group. Bitcoin then garnered more interest from retail investors, but some may now be leery after getting burned, Hickey said.

The Treasury, also on Wednesday, said that through June 2020 both Switzerland and Vietnam had intervened in currency markets to prevent effective balance of payments adjustments. It is not surprising that the Trump administration might make a case about currency manipulation, given recent “runaway appreciation” of the Swissy,

The Swiss Franc was last at 0.8844, with the dollar down 0.12% against the currency on the day. The Swiss government, on Wednesday, said it is open for bilateral talks with the U.S. Treasury about the currency manipulation issue.

Strong euro zone survey figures and hopes of progress on Brexit negotiations pushed the euro above
$1.22 against the U.S. dollar on Wednesday for the first time since April 2018, but later notched
downward. Continue reading “Article: FOREX-Bitcoin breaks $20,000 for first time, Switzerland named currency manipulator”

Article: Swiss franc climbs after US adds it to ‘manipulation’ watchlist

Article - Media, Publications

Swiss franc climbs after US adds it to ‘manipulation’ watchlist

Sam Jones in Zurich and Eva Szalay in London , 15 January 2020

The Swiss franc nudged up to a near three-year high against the euro on Tuesday as markets anticipated the move would limit the Swiss National Bank’s appetite for aggressive action to try to hold down its currency in future.

“The report is a warning shot to the SNB,” said George Saravelos, global co-head of currency research at Deutsche Bank, adding that the franc is likely to push higher from here. It now trades around CHF1.08 against the euro.

The US called on Bern on Monday to “more forcefully support domestic economic activity” by spending money and reducing the country’s already low tax burden, in what was an unusual swipe at a sovereign nation’s financial affairs. “Despite borrowing costs for the Swiss government being among the lowest in the world, fiscal policy remains underutilised, even within the constraints of Switzerland’s existing fiscal rules,” the US Treasury said in its assessment.

The SNB said on Tuesday that its interventions were transparent, and “motivated purely by monetary policy . . . aimed at addressing the negative consequence for inflation and the economy through a highly valued franc.”

“They are not aimed at giving Switzerland advantages by undervaluing the Swiss franc,” it added.

Read Full Article