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The Swiss National Bank says it's lost some €50 billion in the last six months, a loss that coincides with its shock decision back in January to abandon the policy of pegging the Swiss franc to the euro. The idea had been that the franc was just too strong so it needed to be held at the value of 1.20 euro. The country's central bank had been doing this by buying billions of dollars' worth of euros itself. But with the euro weakening, it was decided the national bank couldn't keep doing it forever. The BBC's economics correspondent Andrew Walker takes up the story.
The Swiss franc is seen as one of the safest currencies on the planet. So how has its guardian the Swiss National Bank managed to lose money? Well, actually it's precisely because it's such a popular currency among investors. In 2011 the bank described the currency as massively over-valued and set an explicit limit of 1.20 franc to the euro. It said it would not tolerate the franc being any stronger, and was prepared to buy unlimited quantities of foreign currency to enforce the limit. While in forward to January this year, the Swiss National Bank announced the limit was going. The official reason was that the euro had weakened against the dollar, pulling the franc down with it, so the overvaluation of the Swiss currency had been reduced. |