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What's The Future For The Swiss Franc?

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The story so far... four years ago £1 bought you CHF 2.2. then three years ago £1 got you CHF 1.7, then a couple of years ago CHF 1.5 and the Swiss Franc kept strengthening until at the start of this month it was around 1.2 CHFs to the pound. Parity beckoned from the far horizon.

Personally I bailed out of sterling and into CHF at the time of QE1 in March 2009 - should have done it sooner, but hey, still made a tasty gain.

But then on the 9th of this month (September 2011, in case you're reading this years later ;) ) those naughty Swiss people announced the Franc would be capped at €0.83 and the SNB would sell CHF and buy euros to make this happen. In one day the CHF dropped from 1.2 to the pound to 1.3, and it has continued weakening, now at 1.4.

The CHF was being used as a "safe haven" currency by people who didn't trust any of the "big three" others: dollars, euros and Sterling. So the CHF was soaring, and the Swiss were hurting. Tourists stopped visiting. Selling exports became difficult to impossible, and there was no end in sight to the pain. The SNB had been trying for a while to get the CHF down, trying and failing. So they just made it official and said they would print unlimited quantities of CHF if necessary to hold the cap.

So what now for the CHF? At first sight, it's still a safe currency but the continual appreciation I've grown used to over the years has gone, so is it still worth holding?

Well, the peg to the euro might break. Currency pegs are notorious for breaking. Speculators like nothing more than breaking a peg and collecting a massive profit. If the CHF peg breaks it will lurch upward like the mother of all fireworks.

Also the euro itself could be due to a serious boost if Greece leaves (not the notes ending in Y mind you.) The more PIIGS who leave the euro the closer the euro resembles a Deutschmark. Remember those? Lovely things. :P

But on the down side, most Swiss people feel the cap is too high. They'd prefer 1 CHF to be worth about €0.70 - and it's possible the SNB would actually move the cap down progressively over time, thus causing more loses for CHF holders.

So, to move out of CHF, or to hold? And if to move, where to go? Norwegian Kroner (NOK) have a strange appeal: a country with no debt, in fact a massive sov wealth fund, and more oil than the rest of Europe put together. A prudent people, a currency with a good track record; nothing spectacular against sterling yet - could this be the next "save haven"? We could be in the "smart investor" phase for NOK.

What do you all think?

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Aussie Dollar is a good buy......

Also Indonesian Rupiah is excellent long term buy

Don't ask me why though its complicated! :unsure:

For stock AEP is an excellent choice ! as is SWC !

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One interesting problem that the swiss might face is if countries start exiting the EMU.

If Greece, Spain, Ireland leave, this could arguably make the currency stronger (less need for the cap). But then again, with fewer countries in it, markets generally might perceive the EURs might and influence is waning and sell it.

If Germany, Holland, France leave the EMU then surely the EUR will tank. Would the swiss really want to peg the CHF to a currency held by all the debt-ridden countries ? They might have to print into oblivion to keep that parity going, as all the weak countries force the ECB to print to devalue their debts and put a rocket up their economies.

So the cap only holds while the EUR currency status quo holds. How long is that going to last ? 1,2,3 years ?

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The story so far... four years ago £1 bought you CHF 2.2. then three years ago £1 got you CHF 1.7, then a couple of years ago CHF 1.5 and the Swiss Franc kept strengthening until at the start of this month it was around 1.2 CHFs to the pound. Parity beckoned from the far horizon.

Personally I bailed out of sterling and into CHF at the time of QE1 in March 2009 - should have done it sooner, but hey, still made a tasty gain.

But then on the 9th of this month (September 2011, in case you're reading this years later ;) ) those naughty Swiss people announced the Franc would be capped at €0.83 and the SNB would sell CHF and buy euros to make this happen. In one day the CHF dropped from 1.2 to the pound to 1.3, and it has continued weakening, now at 1.4.

The CHF was being used as a "safe haven" currency by people who didn't trust any of the "big three" others: dollars, euros and Sterling. So the CHF was soaring, and the Swiss were hurting. Tourists stopped visiting. Selling exports became difficult to impossible, and there was no end in sight to the pain. The SNB had been trying for a while to get the CHF down, trying and failing. So they just made it official and said they would print unlimited quantities of CHF if necessary to hold the cap.

So what now for the CHF? At first sight, it's still a safe currency but the continual appreciation I've grown used to over the years has gone, so is it still worth holding?

Well, the peg to the euro might break. Currency pegs are notorious for breaking. Speculators like nothing more than breaking a peg and collecting a massive profit. If the CHF peg breaks it will lurch upward like the mother of all fireworks.

Also the euro itself could be due to a serious boost if Greece leaves (not the notes ending in Y mind you.) The more PIIGS who leave the euro the closer the euro resembles a Deutschmark. Remember those? Lovely things. :P

But on the down side, most Swiss people feel the cap is too high. They'd prefer 1 CHF to be worth about €0.70 - and it's possible the SNB would actually move the cap down progressively over time, thus causing more loses for CHF holders.

So, to move out of CHF, or to hold? And if to move, where to go? Norwegian Kroner (NOK) have a strange appeal: a country with no debt, in fact a massive sov wealth fund, and more oil than the rest of Europe put together. A prudent people, a currency with a good track record; nothing spectacular against sterling yet - could this be the next "save haven"? We could be in the "smart investor" phase for NOK.

What do you all think?

Who knows

Depends on the time frame also

Over 6 months - Id say GBP wil be one of he best performing currencies, maybe gold alhough i wouldnt buy it

Over 2 Years USD

Over 5 Years CHF/Yen/AUD/Gold

10 Years USD

Of course the smart money would probably have been offloading CHFs pre euro tie in

Personally though i think the EURO and CHF together will be sht over the next 2 year time frame, one of the worst performing currencies, not as sht as metals though

Could well be completely wrong though

Edited by Tamara De Lempicka

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Of course the smart money would probably have been offloading CHFs pre euro tie in

I was worried about your 15% sterling at the time, assuming it was from CHF but it soon came good. Maybe it was just about a week too early?

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I was worried about your 15% sterling at the time, assuming it was from CHF but it soon came good. Maybe it was just about a week too early?

as i said at the time i tend to make portfolio adjustments with a perspective of years rather than Days (no need to catch tops or bottoms really, just potential future trend changes and it made sense at that time to diversify from pure CHFs which had rallied from 2.44 since 07, besides i live here so i have a firsthand view of what a Euro parity CHF meant and businesses were starting to struggle), i just look to be on the right side for the main part of a move, trading is for worrying about tops and bottoms

Edited by Tamara De Lempicka

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Over 6 months - Id say GBP wil be one of he best performing currencies, maybe gold alhough i wouldnt buy it

Over 2 Years USD

Over 5 Years CHF/Yen/AUD/Gold

10 Years USD

Is the GBP best performing regardless of more QE because it is already priced in, like it was when QE started in March 2009 when sterling started rising after it?

What rate do you see £ v $ over those 4 timescales.

USD good over 2 and 10 but is it a buy and hold or do you have to get out after the 2?

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How did you do it and what are the tax implications when you swap back?

I opened two accounts at my local High Street Barclays: one current account and one CHF deposit account. Both are free. I moved the cash into the current account (via internet banking) and from there to the CHF account (by calling their forex department and talking to some posh ladies.)

All currency gains are tax free for private individuals. :D

But you cannot offset currency loses against CGT. :(

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I opened two accounts at my local High Street Barclays: one current account and one CHF deposit account. Both are free. I moved the cash into the current account (via internet banking) and from there to the CHF account (by calling their forex department and talking to some posh ladies.)

All currency gains are tax free for private individuals. :D

But you cannot offset currency loses against CGT. :(

You may want to check that again. Unless held for personal use (e.g. because you're travelling there), currency gains are subject to CGT...

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I did the exact same thing. Went from GBP (I was in GBP simply because I had been trading GBP-USD) into CHF a while back with the intention of just leaving my savings in CHF and forgetting about them in the short-term, because the long-term trend was up and up (I was tired of always having to check exchange rates). It was the only way to make any returns (in GBP terms, not in CHF terms, obviously).

Then the SNB ruined the party for me. Annoyingly, I had thought of changing back when the CHF approached partity with the EUR. So what I did was change from CHF into JPY as the next best thing, but am changing JPY into EUR at best rates I can get to buy gold (not buying gold right now - too much volatility!). For the near future, I aim to be 60% gold and 40% JPY.

I do not have access to Norwegian currency, but I would be wary of two things anyway. Are they not too dependent on oil (what happens when the price falls, as it should in these coming turbulent times)? And is it not best to be in a "big" currency when all the smaller players start falling in turbulent times?

Having said that, I cannot see how the SNB can hold out against the long-term trends in CHF. Something has to break eventually.

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I did the exact same thing. Went from GBP (I was in GBP simply because I had been trading GBP-USD) into CHF a while back with the intention of just leaving my savings in CHF and forgetting about them in the short-term, because the long-term trend was up and up (I was tired of always having to check exchange rates). It was the only way to make any returns (in GBP terms, not in CHF terms, obviously).

Then the SNB ruined the party for me. Annoyingly, I had thought of changing back when the CHF approached partity with the EUR. So what I did was change from CHF into JPY as the next best thing, but am changing JPY into EUR at best rates I can get to buy gold (not buying gold right now - too much volatility!). For the near future, I aim to be 60% gold and 40% JPY.

I do not have access to Norwegian currency, but I would be wary of two things anyway. Are they not too dependent on oil (what happens when the price falls, as it should in these coming turbulent times)? And is it not best to be in a "big" currency when all the smaller players start falling in turbulent times?

Having said that, I cannot see how the SNB can hold out against the long-term trends in CHF. Something has to break eventually.

Oil price might head down pretty low in a depression. Also new hydrocarbons coming on stream (shale gas) could reduce the norweigian possibilities for export.

Norway may have a big sovereign wealth fund, but that doesn't mean the management of it is great.

Compared with the CHF the NOK is not a big finance currency. Whereas the Swiss government one suspects are more used to the markets and financially astute. Maybe the government would be less tolerant of their system being destablised and would smack down pretty quickly if their currency started becoming a football.

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ive had to laugh in recent months. ive been in the post office or bank and heard about three occasions of nimbys (55+) ordering swiss francs like they were lord such. you have to laugh now as their nettled little circle of nimby friends that told them about the safety of the franc fell flat on its back a couple of weeks ago when the swiss got control back.

nimbys dont like gold because a gold backed currency means the end of the game.

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You may want to check that again. Unless held for personal use (e.g. because you're travelling there), currency gains are subject to CGT...

I have scrutinised the rules and my interpretation of them is that I don't have to pay CGT. ;)

I do travel to Switzerland from time to time so there's an element of personal use.

From the HMRC website...

Exempt assets - when you don't pay Capital Gains Tax

Some assets aren't liable to Capital Gains Tax at all because they’re exempt. These include:

your car

personal possessions worth up to £6,000 each, such as jewellery, paintings or antiques

stocks and shares you hold in tax-free investment savings accounts, such as ISAs and PEPs

UK Government or 'gilt-edged' securities, for example, National Savings Certificates, Premium Bonds and loan stock issued by the Treasury

betting, lottery or pools winnings

personal injury compensation

foreign currency you bought for your own or your family's personal use outside the UK

When HMRC make something CGT chargeable they also have to make a loss claimable, so for things where most people make a loss most of the time they are CGT exempt. Most people lose out on currency transactions due to commission and spreads. Most people sell their car at a loss. Hence these things are exempt.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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