Without this exchange rate support, we would undoubtedly have had to impose bigger changes in interest rates. Prior to the launch of the euro, we made it abundantly clear that in the event of a massive exchange rate distortion, which would have posed a serious threat to internal stability, we would be ready to take action in the foreign exchange market. We have not had to make use of this measure of last resort at all. CHF Exchange Rates 1.85 1.80 1.75 1.70 1.65 1.60 1.55 1.50 EUR/ CHF 1.45 USD/ CHF 1.40 1.35 1.99  3.99  5.99  7.99  9.99  11.99  1.00  3.00  5.00  7.00  9.00  11.00  1.01  Finally, not even the marked decline of the USD in the past months has led to any undesirable tremors. The effect, registered fairly regularly in the past, that a weakening of the USD is reinforced by an appreciation of the SFR vis-à-vis the DM, has been almost absent. It remains to be seen whether this undoubtedly destabilising "coffee cup effect" has disappeared for good with the advent of the euro. Do we want to maintain our own currency even in 10 or 20 years' time? That is certainly a good question. In economic respects, it seems advisable to remain noncommittal for the time being. Not only on the financial markets do available options have a positive value. They should not be given away lightly.
The Swiss franc is trading currency number 5, ranging behind the Big Three and Sterling, but well ahead of the currencies of much larger countries like Australia and Canada. Economically more important than the trading volume is - second - the position of a currency held in international portfolios. Relative to the size of our country, the SFR occupies an unusually prominent position in international institutional and private portfolios. This position is the combined result of an above-average stability record, an efficient financial centre and the commitment to an independent monetary policy which lends the SFR special diversification characteristics in global portfolios. This certainly is a sign of strength, a sound basis for value creation, especially in our financial industry. At the same time, its strong position makes the SFR particularly sensitive to global capital movements. Thirdly, due to relatively low interest rates, the Swiss franc - like the yen - periodically plays an important role in the short-term financing of trading positions. Currency and securities traders take short positions in our money market to finance long positions elsewhere. This is a rather volatile game, often reinforced by herd effects, which comes and goes with short-term exchange rate expectations. These so-called carry trades from time to time generate a significant amount of short-term exchange rate volatility. In the recent past, however, such strategies have lost their appeal, probably as a combined consequence of last year's increase in money market rates and the appreciation of the Swiss franc.