^ The Swiss pegged their currency on strength, not weakness. As do the Danes. I’m sure there are other examples.
Correct me if I’m wrong, but you’re saying the Swiss made money from pegging as a whole?
Likely. It supported their export market. They did it for a reason. It wasn’t some anti-inflation move like, for example, the Argentine peg. Rather it was to induce inflation and keep their economy rolling.
+1
-1: It surely supported the export market but I do not think they made money net net. If the net return on this action was positive then they surely would’ve waited till their breakeven point before removing the peg - and we would’ve seen some forward guidance in the press. Instead what happened is a shock and awe move, which to me indicates SNB was hurting quite bad over this peg and had to act before things get worse i.e. with the expectation that ECB will announce more QE.
EDIT - Quote from Bloomberg: More recently, the SNB, then led by Philipp Hildebrand, spent billions of francs on spot market interventions. As a result, it ran up a 19 billion-franc book loss for 2010, resulting in calls for Hildebrand to resign.
I heard that today too. overnight rate -4%.
Not sure I would phrase it this way, but I think I agree with your sentiment. Most of the time when countries peg their currency it is to prevent depreciation. The Swiss pegged their currency to prevent appreciation. Whole different ballgame.
If I were a Swiss central bank, a book loss wouldn’t phase me. Just print more money.
Sure hope that’s an annualized rate…
Pegging your currency to increase export is only half the story. And not a very important one. Anyone running ‘billions of dollars’ want to fill in the other half?
Fix exchange rate does have a long history. We didn’t get off of it because we prefer independent monetary policy. We got off it because we had to. Circumstance had changed. The new environment didn’t work under a fix exchange rate. Internal stability is priority number one.
You know the chinese can not let it float!
I told you SNB would be back …
it is now unofficially targeting an exchange rate of 1.05-1.10 per Euro, aka a "soft", kinda/sorta Swiss Franc cap, according to Schweiz am Sonntag.