How can an overvalued currency of a country have adverse effects on its exports? How are the two related?
An overvalued currency means that the exchange value is much higher than the real value of the currency. This would have adverse effects on the country’s exports as the goods would be valued as much higher thus reducing the same as the foreign countries may not be interested in purchasing overvalued goods.The opposite, undervaluing a currency, is used to increase exports if the Marshal-Lerner condition suffices in the economy. In this the country undervalues its currency to encourage foreign countries to buy these now-cheaper goods.This can also be understood by incorporating the Law of Demand, wherein an increase in the price will cause a fall in the demand of the good/service and a fall in the price of the price will cause an increase in the demand of the good/service. However, the elasticity of the exports must be taken into consideration in this scenario.
What is right, a 1.0153 Swiss franc or a 1.0153 Swiss francs?
It’s 1.0153 Swiss Franc, when you’re at the cash register or an exchange booth, people would generally differentiate between singular and plurar, why is it this way ?The Swiss Franc nomenclature system is essentially like the dollar, you wouldn’t say one dollars, and it’s the same with the swiss franc.The Swiss Franc has singular and Plural, it’s is preferred and generally seen better when you differentiate when writing.In other languages like German the singular is used because we say the plural “Franken” already.So, know you know why should you differentitate.
How would the appreciation or overvaluation of the Swiss Franc have a net negative effect in the Swiss economy?
Well Switzerland's economic sucess depends highly on exports. Switzerland exports goods worth north of 300 Billiom USD per year.The stronger the Swiss Franc becomes, the more expensive products made in Switzerland get for buyers abroad.While buyers abroad already pay high price for Swiss products compared to global competitors, such seem to be acceptable for quality reasons. However, at some point there is a (assumed) breaking point at which the high quality of Swiss products would no longer outwheigh the rising prices. Therefore the SNB (Swiss National Bank) has decided to weaken the Swiss Franc in order to avoid export losses and stabilize pricing for export goods respectively.
Would the Swiss Franc be a safe place in case of an economic melt down?
No, it won’t. Are you aware that the entire Swiss economy is only some 750 billion U.S. dollars per year?How much do you think we are able to generate during or after an economic meltdown? Switzerland would not be able to back up deposits in Swiss Francs that are in the hundreds of billions.The local economy is what backs up the value of the Franc. Not our gold reserves. It is our solid economy that makes people to trust that the Franc will be solid as well.At first, when trouble arises, people will buy francs. Lots of them. Its value will rise. Once the investors figure out that they are overinvested they will think that they are in midst of a bubble. Same thing happened in Iceland a few years back. The foreign deposits there exceeded the value of GNP in Iceland several times over. (population some 400′000)The ensuing bank run almost ruined the place.The local government, its Central Bank rather, is well aware of that risk. That is why they CHARGE you interest for your investments in Swiss Francs, to make these investments unattractive. It is easy for them to rise that charge to levels that truly will inflict pain to speculators. Call it currency manipulations, but we are not to allow some fearful, greedy people to ruin the real economy of Switzerland.An overvalued, bloated Swiss Franc would bring ruin to the all-important exporting industry. Or is anyone thinking we live off of chocolate, cheese and secret bank acounts here? That only amounts to lower single digits of total GNP!
What are the consequences of Swiss Franc's peg to the Euro? Are we to expect currency wars and 1930s protectionism next?
This situation is nothing like the currency wars. Due to uncertainty in the currency market, demand for the Swiss franc was abnormally high. Because Switzerland is such a small country, increased global demand has a large impact on the value of the Swiss franc, encouraging more people to purchase them, further driving up their value. At this point, the value of the Swiss franc had nothing to do with the strength of the Swiss economy.The overvalued Swiss franc was hurting local manufacturing as it made Swiss exports relatively expensive. Not responding would have risked destroying Swiss manufacturing, therefore the Swiss National Bank had to find a way to halt the currency speculation. To stop speculation, they put policies that would keep the Swiss franc from appreciating in value. For a speculator, there is no reason to hold a currency unless they expect to appreciate, so they stopped buying Swiss francs, so the Swiss franc returned to a more reasonable, albeit still high, value.This situation is one reason why so few small countries have free-floating currencies. Because of the relatively small volume of currency, there is a greater risk of speculative bubbles. The fact that the Swiss franc was free-floating and seen as highly secure is unusual for a small country, therefore this situation is unique and not indicative of future widespread currency manipulation.
Was the soaring of the Swiss franc really a surprise?
No. The soaring of the CHF was not a surprise.The announcement by the Swiss National Bank of the end of the peg was a surprise.
How important is the Swiss franc in the financial world?
In addition, the Franc is something like the gold standard, keeping its value over decades and centuries.Heavy losses of the EUR against CHF:The more account balance surplus, the stronger the currency, in general. Don’t let fool yourself:These number of not corrected to per capita. All other countries are bigger.Currently, the Swiss National Bank demands negative interest rates:This due to the fact that most countries may go bankrupt in the current financial environment with overdepts, except Norway, Singapore, too, and weaken the Franc which is in too high demand.The Swissie is part of the The Merk Hard Currency Fund
What is the most overrated currency?
You probably mean the most overvalued currency, that doesn't deserve to be so expensive.No currency whose value is determined by the market is overvalued. However, some governments may purposely undervalue their own currency to boost their exports. China did it with the Yuan. Such currencies are artificially overvalued.Some financially weak countries peg their currencies to the dollar (or simply use the dollar itself for local transactions). Effectively, they accept American valuations for their local foods and services, which in effect is becoming an economic vassal of the US. So, their currencies are quite useless to be held by traders and by any other country.Coming back to the Yuan, despite being overvalued, some nations keep a part of their reserves in it. That helps them to hedge against the rising dollar, which rises against both, the Yuan and their own currency.In effect, suppose some commodity costs $100 in the global market, but the equivalent of $50 in China, then it's better to pay in Yuan for the cheaper price. This obviously makes it cheaper for the importing country. For China, it reduces the demand for dollars in the global market. This increases the influence of Chinese bargaining power.