Swiss franc becomes the new gold
By Ian Campbell
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
LONDON — The euro’s tumbling — at least until the next expensive bailout — and it’s panic time. Where are the safe havens? There are a few options but they’re mostly bad. That is why the Swiss franc is becoming the new gold. It’s overvalued, too, but perhaps not so much. And you see its appeal when you look at the alternatives.
The dollar pays nothing and carries a worry or two: the United States has a 9 percent of GDP budget deficit, soaring debt, a political fight that raises the spectre of a — presumably brief — default, cowed consumers, a $40 billion-plus per month trade deficit, fears of double dip.
Better to stick with the euro, then, which is still strong, at $1.41, and does pay something — 1.25 percent. But the euro is still very much experimental. The periphery is insolvent. Emergency cash will probably come at the euro zone 11th hour. But the crisis will go on. There is no mess-free end to currency experiment gone wrong.
How about the pound? You know where you are with sterling. The UK is trying hard to fix itself. But recovery is slow and with a risk of relapse. Interest rates will stay down and with a bit of luck the currency will, too, assisting exports. But that means the pound is not a real winner.
Then there’s Japan’s zero interest yen. It’s strong but singularly unappealing.
And so to the Australian dollar. It’s in the stratosphere, worth more than the U.S. dollar for the first time in its history. And the central bank interest rate is some 4.75 percent. The risk is that the unfamiliar strength may depress the non-mining sector. And if investors get even more nervous about China, the United States and the global economy, commodities and the high-valued Aussie dollar could hit the skids.
Which leaves the Swiss franc. Its strength is a worry for Switzerland but the economy is still growing for now. Until some alternatives get better, it’s likely to appreciate some more.