The Swiss National Bank has made an epic move in establishing a peg for the Swiss Franc against the EUR, with a minimum rate of CHF 1.2 per EUR. The current CHF/RON rate is of RON 3.53/CHF, down on RON 3.8 per CHF on September 5. This was good news for Romanian borrowers in CHF, who had seen their monthly installments going up during the last couple of weeks due to the volatile rate.

“The current massive overvaluation of the Swiss franc poses an acute threat to the Swiss economy and carries the risk of a deflationary development,” wrote the Swiss National Bank in a recent statement. The bank says it is prepared to buy foreign currency in unlimited currencies to keep the rate at this level. “With immediate effect, it will no longer tolerate a EUR/CHF exchange rate below the minimum rate of CHF 1.20. The SNB will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities,” according to the Swiss National Bank.

The Swiss stock market, the Zurich SMI, rose 4 percent after the announcement, with exporters the biggest risers. The main aim of the move was foe Switzerland to keep the level of its exports, and a stronger CHF would have interfered with that. However, as the country imports more than it exports, a stronger EUR could backfire, say pundits.

Commentators have been waiting for such a move, after Switzerland said it would present a CHF 1.5 billion (the equivalent of EUR 1.3 billion) package meant to ease concerns about the Swiss franc’s rate, which has been rapidly increasing during the last couple of weeks. Mid-August, the Swiss Franc (CHF) has reached its lowest level this year against the EUR, following speculations that the Swiss Central Bank might intervene on the market to stabilize the rate.

The volatility of the rate has affected borrowers in Romania, many of which have loans in CHF, a currency which was very popular among banks’ offers a couple of years ago.

editor@romania-insider.com