Central Bank Currency Caps Fail to Prevent Overvaluation: Chart

Central Bank Currency Caps Fail to Prevent Overvaluation: Chart

(Bloomberg) -- Currency caps imposed by central banks have done little to prevent the overvaluation of currencies, Bloomberg Economics says, citing the experience of the Swiss and Czech central banks. While the appreciation induced by scrapping the SNB’s minimum exchange rate in early 2015 has since been reversed, the franc retains the initial overvaluation, and the Czech National Bank has had a similar experience. The franc is about 12 percent above where it should be and the koruna is about 11 percent too high.

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