Wall Street Journal
June 13, 2011
For years, the euro and the Swiss franc moved in lockstep. But in the 18 months since the onset of the euro-zone’s debt crisis, that link has been broken. Since then, the Swiss france has appreciated significantly against the euro.
According to David Bloom, currency strategist at HSBC, the movement of the Swiss franc might help suggest what would have happened to the euro–trading today around $1.4350–if the common currency hadn’t also included its weaker economies. (We’ll call this hypothetical currency the “core euro.”)
“Given the close association between the behaviour of the Swiss and German economies, it would not be unreasonable to suggest that [the core euro] would be fairly stable [against the Swiss franc],” he says.
That would put the ”core euro” at around $1.78, he says, and the “peripheral euro” at about $1.10.
That suggests the “core euro” would be 24% stronger against the dollar than the real euro is today.
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