Switzerland Sets Maximum Level For Franc
This truth was illustrated today when the Swiss National Bank declared that they wouldn't tolerate a franc value above 83.3 euro cents (which in the usual inverted terms means that the euro can't drop below 1.2 francs) and said they would pledge "umlimited amounts" to enforce this new ceiling.
This have been very effective in the short term and the franc is now below the ceiling of 83.3 euro cents. Just how effective ut will be in the long term remains to be seen however given the effects of intervention on the balance sheet of the Swiss National Bank. It's best hope is that the ceiling will make investors voluntarily abstain from pouring money into franc assets. Because if they don't, the losses of the Swiss National Bank might become unbearably high.