As far as i can see the SNB are stuck at the moment,they would usually just raise interest rates but that isn't a option.
How about raise the peg and raise rates?
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I used to think so, but as what is in the paper they believe they mustn't get involved directly in housing policy, therefore raising the rate seems far from beyond. But negative interest rate is an option but they need to raise taxes at the same time however if it dosen't go this way the probability of 1.2 break will be very high.
Interesting....the last days when NY opened eur/chf goes down with higher volume, every day the same procedure...
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"John Kicklighter @JohnKicklighter
$EURCHF is at the bottom of the center-tendency range of its multi-month congestion. I smell a two pip rally coming."
It seems to me that low inflation is the only fundamental indicator that is keeping SNB from abandoning the EUR/CHF cap. The rest of the macroeconomic figures look too good to justify it.
It seems to me that low inflation is the only fundamental indicator that is keeping SNB from abandoning the EUR/CHF cap. The rest of the macroeconomic figures look too good to justify it.
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they probably look good because of the cap.
if cap drops, the figures may also drop....
It seems to me that low inflation is the only fundamental indicator that is keeping SNB from abandoning the EUR/CHF cap. The rest of the macroeconomic figures look too good to justify it.
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And the fact that if they lift the floor the euro chf rate would be dropping like a stone.
Anyone like to guess how quickly the rate would get to 1.00000 if the SNB abandon the floor
hedge funds finally got tired of selling EUR/CHF, this is a big fundamental change:
Euro holds steady against Swiss franc even as it drops sharply against other currencies
-- Evidence points to continued net inflows into the Swiss franc
-- Suggests SNB is working extra hard to keep euro-franc floor intact
By Jessica Mead
The euro is collapsing against pretty much every major currency, with one notable exception: the Swiss franc.
The common currency has held stubbornly above CHF1.20 against the franc, the minimum exchange rate imposed by the Swiss National Bank last September, suggesting that either the central bank is working flat out to maintain the floor or the market no longer thinks it's worth selling euros against the franc.
So far, at least, the evidence supports the first theory. With the euro-zone crisis far from solved and the European Central Bank cutting interest rates to historic lows, nervous investors are still seeking refuge in the franc, traditionally Europe's currency of choice when safety is the chief concern.
According to flow data from UBS, all four types of clients--asset managers, private clients, hedge funds and non-financial companies--sold the euro against the franc last week. What's more, asset managers have been doing this for 10 straight weeks, while firms have been at it for eight weeks and private clients for 12.
"As there is a bidder at the other end for the euros, these trends can only continue," said Geoffrey Yu, a currency strategist at the Swiss bank.
A similar pattern has been observable in recent months in Bank of America-Merrill Lynch's proprietary foreign-exchange flows data.
"What we have seen is strong inflows into the Swiss franc in May and June and predominantly from hedge funds. Hedge funds have been buying the Swiss franc since the start of May and they were already reducing their short positions in April," said Richard Cochinos, currency strategist at BofA-Merrill Lynch Global Research.
Faced with this wave of demand for francs, the Swiss central bank appears to have had to step up its intervention efforts.
Nomura currency strategist Geoffrey Kendrick estimates that the SNB spent roughly 62 billion Swiss francs ($63.7 billion) buying euros in June, up from around CHF52 billion in May.
"This means that the SNB has had to fight harder to cap Swiss franc strength," he said.
The pace of SNB intervention has started to worry some market participants.
"What some clients are beginning to look into is whether the pace of SNB intervention is sustainable--approximately CHF60 billion a month--or if [additional] policies will need to be introduced to slow capital inflows either through capital controls or negative rates," said BofA-Merrill Lynch's Mr. Cochinos.
Even so, most currency strategists expect the SNB to keep up its resolute defense of the euro-franc floor.
There are also hints that speculators may have begun to waver in their bid to test the SNB's resolve.
Although the first full working week of July saw the strongest overall euro sales in almost two months, hedge funds, specifically, also sold Swiss francs for the first time in 10 weeks, BofA-Merrill Lynch flow data showed.
Mr. Cochinos said it was still too early to determine whether that was the start of a new trend.
But another week or so of outflows would suggest that maybe even hedge funds are starting to tire of speculating against the SNB.
Write to Jessica Mead at [email protected]
(END) Dow Jones Newswires
July 13, 2012 06:09 ET (10:09 GMT)2012 Dow Jones & Company, Inc.
