EUR/CHF

1354 GMT [Dow Jones] The recent move in EUR/CHF reflects developments in the euro zone, Commerzbank says. "ECB bond purchasing basically removes tail risk of a euro-zone breakup," Commerzbank strategist Peter Kinsella notes, adding the reason CHF had been trading so strongly was because everyone was afraid of a breakup of the currency bloc. He adds with the SNB's EUR/CHF floor staying put at 1.20, there's only really upside to go from here. EUR/CHF currently trades at 1.2035.([email protected])

DJ Swiss Franc Dip Signals Optimism Around ECB
05-Sep-2012
-- Swiss franc slide hints at growing confidence ECB will support debt markets

-- Safe-haven bunds also see unusually thin demand at auction

By Eva Szalay
Foreign exchange traders gave the European Central Bank a big vote of confidence Wednesday by buying the euro against Europe's ultimate safe-haven currency--the Swiss franc--as suspense builds ahead of this week's ECB policy meeting.

In a sign that the market is warming to the idea that the ECB will finally announce measures Thursday that will slash the risks associated with holding euros, the Swiss franc came under unusual pressure against the euro in late European trading hours.

The 0.27% rise in the euro against the franc to CHF1.2046 was small by the standards of most currencies. But it was a big deal for the franc, which has been pinned close to CHF1.20 against the euro since the Swiss National Bank set that point as the euro's lower limit, almost exactly one year ago.

The sudden move could be a sign that traders are expecting the ECB finally to make good on hints that it would buy the bonds of fiscally troubled euro-zone member countries like Spain to cap their borrowing costs.

"ECB bond-purchasing basically removes the tail risk of a euro-zone breakup," said Peter Kinsella, a currencies strategist at Commerzbank in London, adding that this is the key reason for the franc's stumble.

One trader said that this shift could be strong enough to push the euro as high as CHF1.25, even without any official intervention.

The slide in the franc is not the only hint in the market that traders and investors are girding for significant ECB action. Earlier Wednesday, a German government bond auction drew surprisingly weak investor demand, indicating that investors' appetite for safe retreats at any cost is declining.

The drop in the franc also came amid some market talk that the SNB might consider setting an even lower limit for the franc as economic indicators in the country are showing little improvement. The SNB declined to comment on this speculation.

Data this week showed the Swiss economy contracted 0.1% in the second quarter compared with the first quarter due to falling exports to the euro zone, the country's biggest trade partner, while unchanged consumer prices in August underlined the deflationary threat stalking the economy. That is fuelled in part by the strong franc, which depresses import prices.

"In view of this week's poor Swiss [data] releases there is all the more reason why the SNB will resolve to keep fighting safe-haven inflows, and assuming that the SNB remains profitable, we would rate the chances of a move in the peg to CHF1.25 as being greater than the probability that the SNB will abandon the [floor]," said Jane Foley, a senior currency analyst at Rabobank in London.

Ms. Foley's thoughts were echoed elsewhere.

"There have been some negative growth figures out of Switzerland, and the thought is that... they may need to raise the floor," said Ron DiRusso, head of investment research at FX Concepts, a $3 billion currency hedge fund.

That's prompted some investors to buy the euro against the Swiss franc in the spot market, Mr. DiRusso said. However, FX Concepts is remaining on the sidelines on the Swiss franc, because the SNB has been so successful at preventing the currency from moving outside of a very narrow trading range against the euro, he added.

As the floor prepares to mark its first birthday Thursday, the euro could be about to move higher against the franc even without SNB help, not least because dealing volumes in the pair have generally been in decline ever since the floor robbed traders of the incentive to trade it.

"The exit door is minute. If things start turning it will happen very fast," one trader said.

Write to Eva Szalay at [email protected]

(Emese Bartha in Frankfurt and Matthew Walter in New York contributed to this article.)

(END) Dow Jones Newswires

September 05, 2012 11:43 ET (15:43 GMT)

Its all up to Mario then he better not let us longs down.

I'm guessing the market is not happy with mario.

Back into range.

I closed all of my positions.

Probably a good plan i'm not going to

Nothing surprising from Mario.

Small drop but it's still at 1.2040.

About the rumor SNB is bidding at 1.2012 or somewhere there - in this manner, harder for us to reload low now. Guess we have to wait until tomorrow to see if got another chance to reload pre-SNB next week.

One positive for longs is as you said its still holding 1.20400

My assessment on the price action so far is well..so far so good....i think the leaks yesterday have priced in this move already..and if we can close the week above 1.2040 ..I will take that as a positive sign moving into next week... If any of you have made money so far..ride this time out...put a stop at above break even and see where this goes... i sense that this move is different as long as we get no disappoint from the ECB or SNB.

Is this just a rumor?
What I can't figure out why would the SNB be bidding at 1.2012?
Why not let traders take these positions so they don't have to expand their balance sheet with euros anymore than they already have done?
Why not just defend the floor of 1.2000 as they have been doing?

It came from forexlive team. market contacts told the team there. so take it for what you will.

I cant confirm it as true myself just posted it as interesting info

I would prefer a weekly close above 1.20750 or is that being to greedy?

Anyone else think that now the ECB has sorted there stuff out the SNB might raise the floor to 1.25?

There's Not gonna be a floor raise for sure. And no bazooka by Draghi. Let's see normality coming again

Haha you are a bears bear qatar?

Big sellers up at that 1.20700 level also 200 day ma

I think that we have all seen this false dawn before with the supposed 'solution' to Europe's problems. They seem to keep stringing countries like Greece, Spain, Portugal along even though there are huge structural adjustments that must be made. Even if they were all implemented it would take years and years and years to sort out these deep problems.

Issues like pension obligations, structurally high unemployment rates (especially for the youth, unsustainable government spending and budget deficits, along with even more economic problems in the rest of the entire world makes for one ugly situation.

Call me a glass half full person, but I would not bet on global prosperity for years. In short, I don't thing the ECB has sorted anything out, just delayed the inevitable. Also another thing will be all the problems that a global ZIRP (Zero Interest Rate Policy) will cause in the years to come. This will be a big issue....

No but a complete collapse of the euro has been put off.Maybe a bit more short covering on this pair before next week.


Is that it ? this daily candle isnt looking to good coming off a strong level at 1.20700

Very ugly candle. Luckily for shorts stop level is very clear at 1,207. Now expecting next meeting a floor break. Perhaps

I know your a bear but why do you expect the floor to break

When sth cant go down it will go up. if 1.2 is all time low for this pair 1.2050 is very cheap. dont wait for 1.2010 again and go long. the sooner the better.

never happen..no real break...ever.. i would not even worry about a break. the only way a break will happen is if they take away the floor. SNB has this under control. You should read the papers online over there... Pressure is on to raise the floor if anything. Dont fight this central bank...your an idiot if you do.

Because people is now complacent, when we are seeing clearly that every attempt to go up is frustrated. It's very difficult to see a jump but the pair can plummet to 1,2010 in a few minutes.

Market soon will realize again that EURCHF real value is under 1,20.