DislikedExperts need your opinion EUR/GBP 15 min possible long trade? Also 1 hr looks like change of trend upwards now?Ignored
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Although nothing to do with Ichi, I feel very comfortable to ask that question here, because of the kind people out in this thread.
In some thread I was reading, Swiss National Bank sold 5M CHF and bought €uro to weaken their currency.
My question is, what will SNB do with that huge amount of €uro... cause when they sell them back, they invalidate their goals to weaken CHF. Same question to BOJ...?
In some thread I was reading, Swiss National Bank sold 5M CHF and bought €uro to weaken their currency.
My question is, what will SNB do with that huge amount of €uro... cause when they sell them back, they invalidate their goals to weaken CHF. Same question to BOJ...?
- #12,532
- Apr 12, 2010 4:00pm Apr 12, 2010 4:00pm
Although nothing to do with Ichi, I feel very comfortable to ask that question here, because of the kind people out in this thread.
In some thread I was reading, Swiss National Bank sold 5M CHF and bought €uro to weaken their currency.
My question is, what will SNB do with that huge amount of €uro... cause when they sell them back, they invalidate their goals to weaken CHF. Same question to BOJ...?
In its simplest form, the purchased euros will remain in the SNB's foreign exchange reserves until such a time as they find the need to increase the value of the CHF which they can do by buying the CHF back with the EUR they have in their reserves. Or they can simply sell the eur back into the market and buy gold or some alternative to their own currency.
This is a cyclical issue and will likely in a few years time be of little concern to them provided the European economy as a whole comes back online and starts growing again. This would likely be EUR positive which will increase its value against the CHF and make Swiss exports more affordable again - making any appreciation of the CHF against the Euro less dire in consequence to the Swiss export industry.
Because the SNB can essentially just print money whenever they like, there is no acute short term pain felt by their economy when this is done however they do need to manage the amount of money that they are printing carefully otherwise the resulting devaluation will cause inflation to become a major factor in their economy.
In Japan, they are able to print essentially however much they want because their economy is stagnant and has been in one way or another for the best part of 20 odd years - due in many respects to terribly low domestic demand/consumption of goods and services.
Essentially the reason that this issue is so visible with the SNB and BOJ is that both economies rely heavily on exports to drive their respective economies. Because the Swiss economy is so heavily reliant on the Euro region as its biggest export market they are more concerned with addressing the short term threat to their economic prosperity (export prices rising and becoming uncompetitive) than the longer term risk of inflation. Without export sales, economic growth, people working, earning money and spending money both external and internal demand in their economy reduces and this has a deflationary effect. This is the reason why they are not too concerned about the short term impact of printing money to buy other currencies.
The SNB buys Euro in a direct bid to devalue the CHF / push up the EUR in relation purely to each other.
The BOJ sell yen however they will often diversify their holdings between USD, EUR and the currencies of their other main trading partners as their export industry has a much greater global reach than that of Switzerland.
This is a very basic summary however if you want to know more about it maybe google sovereign foreign exchange reserves, and artificial currency devaluation.
4x.
- #12,533
- Apr 12, 2010 6:53pm Apr 12, 2010 6:53pm
Nightyhawk,
In its simplest form, the purchased euros will remain in the SNB's foreign exchange reserves until such a time as they find the need to increase the value of the CHF which they can do by buying the CHF back with the EUR they have in their reserves. Or they can simply sell the eur back into the market and buy gold or some alternative to their own currency.
This is a cyclical issue and will likely in a few years time be of little concern to them provided the European economy as a whole comes back online and starts growing again....
Trade Smart
