Swiss franc surges as Hildebrand resignation puts Swiss currency policy in doubt
The Swiss franc rose to its highest level in four months against the euro after Philipp Hildebrand resigned as chairman of the Swiss National Bank, throwing the country’s currency policy into turmoil.
A brief statement from the central bank said the decision took immediate effect and Hildebrand would appear at a press conference at 14.15 GMT, at which a number of documents would be made available. Calls for Hildebrand to stand down have been intensifying since it was revealed his wife Kashya netted SFr60,000 on a long USDCHF trade thanks to his September decision to introduce a floor in EURCHF.
Hildebrand spent last week defending his position, claiming that the deal did not breach any rules, but has come under increasing pressure to step down as internal critics have voiced their concerns over the ethics of the transaction.
Hildebrand was the driving force behind the SNB’s, so far largely successful, decision to introduce a SFr1.20 floor in EURCHF.
Some fear that with his departure, the credibility of the central bank’s currency policy will now be tested by the market, a turn of events that has the potential to cost the SNB billions on its FX reserves.
The SNB has recent experience of being tested by the market, given that it had to abandon its Hildebrand-inspired intervention policy of 2009/10 with a paper loss of tens of billions.
Hildebrand drew strong internal criticism at the time, as the central bank’s intervention merely served to give speculators a better level at which to buy the Swiss franc.
Hildebrand’s parting gift to his ex-employer might prove even more costly.