Global investor demand is directed toward securities denominated in a particular currency, the conservation of value and purchasing power of which is trusted. As a result, the currency in question becomes expensive and the country concerned suffers price competitiveness disadvantages. – Prior to the entry into the European Monetary Union in 1999, periods of dollar weakness – such as the decline in the USD exchange rate between 1985 and 1990 and during the Mexican crisis around 1995 – were repeatedly associated with portfolio shifts in favor of the DEM. The resulting appreciation of the DEM put a brake on German exports. – In the course of the financial crisis that followed the subprime crisis, the CHF was in strong demand. The Swiss central bank then tried to curb the rise in the CHF exchange rate by selling CHF on the foreign exchange market, which it apparently only succeeded in doing insufficiently. After all, if the CHF is considered a safe haven worldwide, the central bank of a small country like Switzerland can hardly influence this preference. – See appreciation, appreciation effect, financial island, unit value relation, interest island. – Cf. Monthly Report of the Deutsche Bundesbank of December 2008, p. 36 (monetary union relieves DEM of appreciation pressure), Monthly Report of the Deutsche Bundesbank of July 2010, p. 56 (Swiss National Bank tries to alleviate appreciation pressure from CHF), Monthly Report of the ECB of October 2011, p. 19 f. (exchange rate CHF and EUR since 1999).
Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without express consent!
University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: email@example.com