The SNB several months ago drew a line in the sand at 1.20 to protect the Swiss Franc. Since April 5th, when that line was violated for just a few minutes, the SNB has been every vigilante. The pair has traded within a small range staying close to 1.2010. As the euro crisis continues to grow, the Franc has remained oblivious due to the floor set by the bank. Recently as it becomes more and move possible for Greece to leave the euro and continued cracks in the overall euro idea and philosophy continue to crack, as politic between several member states do not mess, the Swiss National Bank, or SNB, is considering setting up a task force to draw an emergency plan for dealing with a possible collapse of the euro, though the bank believes such a scenario is highly unlikely, SNB President Thomas Jordan said in an interview on Sunday.
He told SonntagsZeitung newspaper that one measure being considered is capital controls. Swiss policymakers imposed a ceiling of 1.20 versus euro in September last year to stem excessive gains in the currency following the worsening of the Eurozone debt crisis.
Jordan, who was appointed president on April 18, said that the central bank will continue to enforce the minimum exchange rate even under adverse economic conditions. Jordan said the Franc is clearly an over-valued currency and is affecting many firms.
Switzerland may need measures beyond the exchange rate limit if the risk of Greece exiting the Eurozone materializes, SNB spokesman Walter Meier told Neue Zürcher Zeitung newspaper.
Echoing Jordan’s comments, Meier said a task force is exploring measures such as the introduction of capital controls.
Jordan said it is not possible to arbitrarily manipulate the currency. In the current economic situation, such an action could prove “disastrous and counterproductive.”
Last week, there were reports that the euro members are preparing a contingency plan for Greek exit. However, the Greek finance ministry had rejected the news, saying such reports are hindering the country’s efforts to address its challenges at this critical juncture. Several banks, brokers and exchanges have already starting positing Drachma rates, the old Greece currency in preparation for a change.
None of this may ever come to be, but markets have to plan for the inevitable.