Swiss National Bank Chairman Thomas Jordan has a problem: No matter what he does, no matter how much he charges for people to hold Swiss francs in Swiss bank accounts, no matter how many foreign-currency-denominated assets he buys, no matter how much the U.S. interest rate rises, no matter how many times other Europeans don’t do something stupid at the ballot box, no matter how often he points out that a chocolate, timepiece, skiing and tax-evasion-based economy cannot support such a strong currency, nobody listens. And so he must continue to roll the boulder up the hill, hoping one day someone will notice his efforts and stop buying francs.
“In periods of uncertainty, [the franc] is still subject to increased upward pressure,” SNB Chairman Thomas Jordan said at a media conference….
Asked to square the central bank’s assessment that the franc is overvalued with these positive economic signals, Mr. Jordan said that the current account isn’t a reliable indicator of currency strength, while Switzerland’s economic growth has lagged behind that of the U.S. and Europe with inflation still benign.
“We have to continue with our expansionary monetary policy” and absorb some of the effects of the franc’s strength, he said.
Some are not convinced that the Sisyphean effort will work, because, well, the assumptions underlying said Sisyphean effort are as wrong as double-dipping in the fondue.
Still, Switzerland’s resilience has raised questions about whether there is a distinction between an overvalued currency and one whose strength reflects a fair valuation by investors.
“The SNB assessment that the [franc] remains overvalued might be true from a long-run perspective, but it is poor guidance for the market,” said Karsten Junius, chief economist at Bank J. Safra Sarasin. “It rather is more likely that the [franc] remains structurally highly valued.”