I'd suggest that the SNB has "set a ceiling" for the value of the CHF vs the EUR.

But everyone except Wollishofener and ChrisNeedsToKnow understands what is meant by the statement that the CHF is pegged to the EUR. And to all intents and purposes, it is. Nobody believes that the CHF will depreciate against the EUR any time soon, and the fluctuations in value of the CHF vs the EUR are so small that they are immaterial to the vast majority of people going about their everyday business -- and not buying or selling billions of CHF worth of EUR, or vice versa.

I exactly understand what it meant (=the ceiling), however the statement "pegged" is -simply- wrong.

What the SNB did under Hildebrand, is one gigantic bet:

They took the bet that the EUR will eventually appreciate against the CHF, that the EUR-countries overcome their crisis, lifting the "uninfluenced" rate over 1.20 again, with the payoff of having protected Switzerland from a temporary very high peak of its currency.

This is so, because there can only be two scenarios:

#1 (EUR-survive)
The EUR will survive, the rate will naturally climb above 1.20, the SNB can slowly sell off their EUR-stockpile, all is back to "before crisis".

#2: (EUR-collapse)
The EUR collapses. The stockpile of EURs the SNB built up is now worthless. In this case, all people who invested in CHF but live in the EUR-area will suddenly remember: Wait - I just lost my EURs, but I still have some CHFs! So they will all start spending their CHFs.

Although some will use the CHFs in exchange for trade outside of Switzerland, eventually these CHFs will hit Switzerland, causing a skyrocketing inflation in Switzerland. (Essentially, because in this scenario the SNB is currently giving out CHFs "for free" against (worthless) EURs, which is like printing money)

Alternative:
Changing horses mid-stream, i.e. voiding the ceiling. If this happened tomorrow, the rate would shoot to something around 0.9. In this case the SNB has the disadvantages of both sides: A stockpile of depreciated EURs in their basement, and collapsing exports due to an overexpensive Franc.

Summary:
This was a highly dangerous manoeuvre, but now they have to sit it through and hope for the best.

My personal approach is brick-and-mortar (a flat), and physical gold, since I strongly believe that none of the states/banks really know what is in their books. I think a monetary reform will happen at some stage in the near future. And yes, I do hope I´m wrong.

I too, had no idea what the savvy financiers were advising, but didn't want to be called a dumb blonde, an expression American feminists stopped about 100 years ago that many English friends still crack. So, I thank you savvy financiers, and hope that American and Euro -franc exchangers got some info here, but didn't see anything on the pound being asked so I suggest a new thread? xe.com is my go to. learned a lot.

The peg will fail, only a matter of time for a catalyst to spook the markets and speculators will do the job to beat the rate back to parity.

A German exit would change the calculus, but a CHF/Dmark peg is uncertain as Germany would become a new safe haven and money would flood in (and being a large economy, it will be careful not to upset the balance of trade with the US and Asian tigers via currency manipulations; little Switzerland can easily get away with that).

In any event, the EU will gradually play a less important role in Swiss economics in the coming years as Swiss companies start moving into emerging markets, which is where most of the growth, and money, is regardless of le franc fort.

It is already happening: http://www.swissinfo.ch/ger/wirtscha...l?cid=32932470

It's only a matter of time before Switzerland can comfortably apply the guillotine clause on EU-Swiss bilateral agreements and open it's doors to non-EU businesses and professionals.

How inconsiderate of me of using the wrong word. As the OP was interested on the CHF to USD path, I took a shortcut assuming that for the foreseeable future the CHF attractivity will leave it pegged to its SNB set maximum rate against the EUR (not minimum rate, as incorrectly mentioned in one of the post).

Whether to use "minimum" or "maximum" depends on the perspective. From a Euro-perspective, it´s a minimum of CHF1.20 per Euro (as it may well be 1.30 or 1.40 CHF/EUR)... is thus correct, although you could also say it the other way around.

if you can come up with a good single syllable alternative to 'peg' e.g. in the sentence "the peg will break" or "the chf is pegged to eur", then i'll be happy to use it. until then, i will stick to 'peg'.

I found the above mentioned "ceiling" a pretty good term?

Whatever, you can´t replace dog with cat, just because you find the other word more complicated.

Ceiling is too long. And your verb suggestion would be 'ceilinged'?

Well, actually, we can and we have!

Sure, just as you can't replace "ceilng" or "maximum" with "floor" or "minimum". The SNB is manipulating the value of the CHF against the EUR -- not the other way around. It has no control over the broader value of the EUR. Therefore it is setting a limit on the value of the CHF in terms of EUR, and that limit is a maximum value. Whether you express that value as CHF/EUR or EUR/CHF, it's still a maximum value of the CHF, and should be referred to as a ceiling.

Otherwise you could argue that Andy Murray hit the floor of his career yesterday, only one place away from winning a Grand Slam.

When using 1.20, it´s always "minimum" / "floor":

When Mr. Hildebrand announced the new policy, he said something like "wir werden diese Kursuntergrenze von 1.20 mit aller Konsequenz verteidigen" - "we will defend this minimum rate by all means" (Can´t find it quoted, but I remember by heart).

Mr. Jordan later said >>there is no alternative to the minimum-rate<<.

>>Thomas Jordan Sunday reaffirmed the central bank's commitment to defend the minimum exchange rate of the Swiss franc against the euro<<

>>Other approaches to managing foreign exchanges movements - notably...Denmark's long-standing crown peg to the euro...would not work in Switzerland."The minimum exchange rate is an absolute necessity for the Swiss economy," he said.<<

>>SNB Must Defend EUR/CHF Floor, Minister Says<<


Other way of seeing it:

• Google SNB + Mindestkurs (=About 2,190 results)
• Google SNB + Maximalkurs (=About 0 results (although there is 1 result))

English version:

• Google SNB + minimum rate (240 results)
• Google SNB + maximum rate (granted, lots of results, but none actually talking about a "maximum")

There is no "right" and "wrong", it depends on perspective.

• If you look to change EURs into CHFs, you will get a minimum of 1.20CHF for your EURs.
• If you look to change CHFs into EURs, you will get a maximum of 0,83 EURs per CHF.

• I fail to see how you could use "1.20" together with "maximum" or "ceiling"?

It's a floor on the value of EUR/CHF.

Just some ideas

The SNB can sell an unlimited amount of Francs, and right now it seems they are willing to do exactly that.

Last month alone (June) the SNB bought 60 billion EURs, in other words they sold 72 billion Francs, just to stay at 1.20.

• 72 billion = 72000 million
• Switzerland has 8 million inhabitants
  • 72000m/8m = 9000
  • --> In June alone the SNB bought EURs for 9000 CHF per inhabitant of Switzerland.
• Another way to see how much this is:
  • A month has 43200 minutes (24*60*30).
  • 72000m/43200 --> 1.67m CHF per Minute

Since the SNB has an unlimited amount of CHFs available, they can continue this regime as long as they deem it fit. There is no catalyst which can win against the infinitely deep pockets of any central bank, which tries to weaken its own currency.

Switzerland, being a small economy, should usually look not to upset any balances. However, their stable currency invoked a strong influx of capital, and this is what is upsetting the balance. While the EUR-zone looks at the CHF for informational purposes, the only country which has a problem with the CHF is Switzerland itself. Their current intervention doesn´t have the aim to upset anything. On the contrary, they are trying to save their export based industries, which includes tourism.

If Germany were to reintroduce the DM, they would have exactly the same problem (a skyrocketing appreciation of their currency).

I hope so too. The more Switzerland relies on 3rd countries, the more it will be able to preserve their higer standard of living compared to the EUR-countries.

While I don´t like the bilaterals in their current form, using the guillotine can have some very disadvantageous effects. Especially transit rights, which are of the essence for any land-locked country.

While I agree with you, at some point even the SNB will realise that it is too high a price to pay and will voluntarily break the peg.

Transit rights should anyway be covered in part by the treaty of the sea.

It is a minimum because the EUR will be at least worth 1.20CHF ? or is it the maximum quantity of EUR that the CHF will be allowed to purchase ?
So I guess we are saying that the SNB is setting the minimum rate of the EUR against CHF.
I believe what they are able to do is st the maximum rate of the CHF against the EUR.
I admit that that maximum rate is not 1.20.

Esteemed gentleman,
Ya'll are extremely well informed. I just would like to know, should I move my money (CHF) to USA, now to October 1st, when MIGHT be best? Any guesses? Thank you and keep rocking bankers!
Zoe

Last August.

Agreed that last August (actually it was late July iirc) would have been awesome as I moved a whole lot of money at that point but...that being said, it's really only going to matter if you have a large sum to move, i.e. over 100k. Keep your eye on the eurocrisis news but, if I were moving money to the US today, I'd do it now and, depending on the sum involved...I might do half if I thought it might improve some but in this situation right now I don't see it getting better for a while so I'd probably transfer the whole enchilada. With larger amounts, you can sometimes negotiate a better rate than the retail, too.

Also, I might add, since you mention October, that historically the markets plunge in September when everyone returns from their holidays. I'd transfer now.

On the 10 August it was possible to buy a USD for 0.73 chf, today it's around 0.98 or a 34% increase in the USD.

At the time most of the people were happy to hold CHF selling both £ / $ to do so, it's called flight to 'safety'. Safe investments are always expensive in my experiance!