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EUR/CHF: Best left alone until after the Gold referendum

I’m not a believer in central bank market intervention after seeing it end in tears on too many occasions. The very strong comments from the SNB’s Zurbruegg (copied below from the FXWW chatroom) would normally cause more of a spike than they did which suggests to me that the SNB is in for a long hard battle.

*ZURBRUEGG SAYS SNB CAN BUY FX IN UNLIMITED QUANTITY : *ZURBRUEGG SAYS SNB WILL ENFORCE CAP WITH UTMOST DETERMINATION
*ZURBRUEGG SAYS GOLD INITIATIVE IS HARMFUL TO SNB… allĀ  bbg

Yes the SNB can buy FX in unlimited amounts but the distortions that this would create across all markets would make this totally unpalateable for other central banks.

  1. Hi Sean, what i really dont understand is why Snb preders this kind of intervention instead of bond buying like other central banks? Appreciate your answer.
    best to u. Thanks

  2. This is different in that they are trying to defend 1 exact market level and the only way to do this is in the spot market. As they are selling their ccy, as opposed to buying like the BOE tried to do in 1991, they can theoretically print as much as they like to sell into the market. They are also using l/t macro policies to keep the CHF from strengthening but physical intervention is the only way to defend one particular level

  3. Isn’t the SNB left with plenty of EUR (and USD?) after their intervention and these balances are used to purchase debt instruments in those currencies?

  4. Sean, exact same stuff SNB has been saying the last three years. They may not make explosive iintervention but should be able to sit on the 12010 bid for a long while IMO

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