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S’weird in Switzerland


Today is Switzerland’s national holiday, and of course FRED has Swiss data, which can be especially interesting because the Swiss economy is in many ways out of the ordinary. Previous FRED Blog posts have discussed the “peculiar” Swiss unemployment rate as well as its negative interest rates. In fact, as of today, the Swiss 50-year government bond has a negative nominal yield.

Today we look at the Swiss exchange rate. The graph shows in green the exchange rate of the Swiss franc with the euro, including a dramatic change on January 15, 2015. Unlike other countries’ exchange rate troubles, this event is actually an appreciation of the Swiss franc. Swiss franc appreciation is bad for exports, which Switzerland depends on. Because the franc has long been viewed as a refuge currency when economic trouble brews in Europe or elsewhere, it has been under a lot of appreciation pressure for some time. The Swiss National Bank has tried to cap the exchange rate at 1.20 for some time, flooding the currency markets with francs in exchange for euros and other assets. This sounds like a dream come true for any central banker: print money at will without negative consequences. Yet, this environment was unsustainable and, on January 15, 2015, the SNB decided to stop managing the exchange rate. The franc appreciated by about 20% almost immediately, and LIBOR interest rates dropped deep into negative territory. The graph shows the 3-month LIBOR in red.

How this graph was created: To create the Swiss franc/euro exchange rate, use the franc/dollar and dollar/euro exchange rates. First, search for “Franc Dollar” and graph the exchange rate. In the “Edit Graph” panel, add a series to the current line, searching for “Dollar Euro.” Apply the formula a*b. Then  search for “Franc LIBOR” and place that series on the right axis using the format tab.

Suggested by Christian Zimmermann.

View on FRED, series used in this post: CHF3MTD156N, DEXSZUS, DEXUSEU


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