SNB Unlikely To Return To Market Now. By Nicholas Hastings
That should have been the Swiss National Bank's last hurrah.
For over a year now, the Swiss central bank has been intervening to stop its franc from rising too fast against the euro.
Last Thursday, it did so again--taking advantage of thin pre-Easter trading conditions and short-term speculative positions taken as the euro fell to new record lows against the franc.
The intervention exercise pushed the euro from its latest record low at CHF1.4145 all the way back up over $1.4400.
See the result of the latest SNB intervention:
Click Image to Enlarge
Like other recent interventions, the latest selling of the franc against the euro will do little more than buy the central bank some time--time in which the Swiss economy will continue to improve and the strength of the franc becomes less of a concern.
However, recent data suggest that time isn't needed any more.
The Swiss economy continues to go from strength to strength. The latest Kof survey, last week's purchasing managers' index and even the country's leading indicators have proved stronger than forecast and established that the Swiss recovery is much more robust than that of its euro-zone neighbors.
If anything, new consumer price data Tuesday, showing that Swiss inflation has risen to 1.4%, its highest level since November 2008, suggested that a strong franc should positively be welcomed to help keep price pressures at bay.
Certainly, there is little sign that upward pressure on the franc will abate.
If anything, the franc is likely to become even more attractive as the Swiss economy continues to pull ahead and the terms of a debt rescue package for Greece show signs of unravelling.
Although Greece denied reports earlier this week that it is seeking to renegotiate International Monetary Fund participation in the package, Greek officials have acknowledged that they want more clarity about the IMF's role.
So although the euro has remained a little higher against the franc for now, the single currency will more than likely come under renewed selling pressure that will take it down to CHF1.40 as the market continues to worry about Greece's ability to resolve its debt problems.
As some analysts reckon, the SNB's intervention has only provided the market with an even better opportunity for selling the euro, a trend that will likely intensify as more corporate and real money flows join the fray.
If so, then we could well have seen the last of the SNB, as the central bank accepts that its currency management role is over and that it is time to retire from the market.
Early Wednesday in Europe, the euro was still under pressure due to reports that the terms of any Greek rescue package with other euro-zone countries and the International Monetary Fund hadn't been finalized.
The euro was unchanged at CHF1.4324 but had fallen to $1.3369 by 0745 GMT from $1.3406 late Tuesday in New York, according to EBS.
The single currency was a little higher at Y125.68 from Y125.63 while the dollar was up at Y93.97 from Y93.71 after both the Federal Open Market Committee minutes and the Bank of Japan's latest meeting showed little sign of policy change in either country. This will leave the yen vulnerable to further losses on a yield basis.
For over a year now, the Swiss central bank has been intervening to stop its franc from rising too fast against the euro.
Last Thursday, it did so again--taking advantage of thin pre-Easter trading conditions and short-term speculative positions taken as the euro fell to new record lows against the franc.
The intervention exercise pushed the euro from its latest record low at CHF1.4145 all the way back up over $1.4400.
See the result of the latest SNB intervention:
Click Image to Enlarge
Like other recent interventions, the latest selling of the franc against the euro will do little more than buy the central bank some time--time in which the Swiss economy will continue to improve and the strength of the franc becomes less of a concern.
However, recent data suggest that time isn't needed any more.
The Swiss economy continues to go from strength to strength. The latest Kof survey, last week's purchasing managers' index and even the country's leading indicators have proved stronger than forecast and established that the Swiss recovery is much more robust than that of its euro-zone neighbors.
If anything, new consumer price data Tuesday, showing that Swiss inflation has risen to 1.4%, its highest level since November 2008, suggested that a strong franc should positively be welcomed to help keep price pressures at bay.
Certainly, there is little sign that upward pressure on the franc will abate.
If anything, the franc is likely to become even more attractive as the Swiss economy continues to pull ahead and the terms of a debt rescue package for Greece show signs of unravelling.
Although Greece denied reports earlier this week that it is seeking to renegotiate International Monetary Fund participation in the package, Greek officials have acknowledged that they want more clarity about the IMF's role.
So although the euro has remained a little higher against the franc for now, the single currency will more than likely come under renewed selling pressure that will take it down to CHF1.40 as the market continues to worry about Greece's ability to resolve its debt problems.
As some analysts reckon, the SNB's intervention has only provided the market with an even better opportunity for selling the euro, a trend that will likely intensify as more corporate and real money flows join the fray.
If so, then we could well have seen the last of the SNB, as the central bank accepts that its currency management role is over and that it is time to retire from the market.
Early Wednesday in Europe, the euro was still under pressure due to reports that the terms of any Greek rescue package with other euro-zone countries and the International Monetary Fund hadn't been finalized.
The euro was unchanged at CHF1.4324 but had fallen to $1.3369 by 0745 GMT from $1.3406 late Tuesday in New York, according to EBS.
The single currency was a little higher at Y125.68 from Y125.63 while the dollar was up at Y93.97 from Y93.71 after both the Federal Open Market Committee minutes and the Bank of Japan's latest meeting showed little sign of policy change in either country. This will leave the yen vulnerable to further losses on a yield basis.
- 7 April |
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