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  #521  
Old 16.08.2011, 15:44
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Re: Swiss Franc Climbs to Record High

markets at its best
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  #522  
Old 16.08.2011, 20:15
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Re: Swiss Franc Climbs to Record High

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Nothing has changed over the last few days since the franc came off it's peak.
The Swiss want to weaken their currency.
The upward pressure on the franc from financial markets are still in place.

The only thing which weakened the franc was talk of a peg. This verbal intervention introduced some uncertainty and temporarily took the steam out of the franc.
In other words it settled things down after a few days of extreme silliness and volatility across markets.

Nobody doubts the Swiss want to see a weaker franc. But in order to get it, the politicians and the SNB will have to put up or shut up soon in terms of:
(a) introducing a peg or (establishing some ceiling); and
(b) demonstrating they have to teeth to defend it, because attempts to depress the franc will surely be tested by currency markets.

If you think the SNB are capable of successfully doing both of those, then sell the franc. But this is a big ask.

By the way, you can't dismiss currency flows into the franc simply as speculation. I would label it as fear. Nobody denies the franc is ridiculously expensive. But like the moves into gold, significant flows have been about capital preservation in a world where the choice is limited - ie money looking for a safe haven during stormy times.

You want to see speculation? That will come in spades if the the SNB announces a peg or ceiling and the markets aren't convinced they have the will or the teeth to defend it.
At first, the verbal announcement had some effect, but only for about two days. What works since then is the additional "money printing" of the SNB. Lower interest rates is another side, but not as easy to manage.

The SNB has no other choice than to continue with the "money-printing" for a while (Mr Leutwyler had to do so for some weeks). And it may become necessary to purchase additional Euros, and THIS time, the SNB has the backing from the Federal Council and ALL major parties, which is a difference to what it was last time.

Experts of the union are at present working on additional methods to keep speculation in check.

"The markets are not convinced" ? What markets ? If you mean the finance-markets then of course yes, the SNB will be forced to act. But the export-markets already do react positively with new orders. I hope that also the markets of the inbound-tourism react positively.

Whether you describe the "flow" of money as "speculation" or "moves out of fear" does not matter. Counter-measures are to be taken.
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  #523  
Old 16.08.2011, 20:34
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Re: Swiss Franc Climbs to Record High

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A) please be more precise. You here do NOT refer to the markets, you refer just to the finance-markets. While I above referred to THE markets.

B) the market was manipulated by some speculators. They did not work on ideological grounds, neither destructivily nor positively but simply in accordance with their interests.

C) "how the market works" is not the point. If the "finance-market" works in a way destructive to your economy you have to take action to correct the status. And in times of crisis, extraordinary measures are required to tackle extraordinary circumstances !
A) All markets work this way, we have Migros & CoOp, then Denner & Aldi comes along because it believes the others prices are 'wrong'

B) The SNB tried to manipulate the market by speculation & failed. If you don't have the balls to speculate, don't try it. It's not for the risk averse 'Swiss'

C) All markets work to make money, thats all, for every winner there is a looser. Selling all of CH gold's reserves & heavilly shorting gold would do the trick, they would probably be able to buy back the gold @ 850 or less in a few days.
The problem with central banks is they want to meddle rather than make money so they will always loose. The SNB has to be seen as a risk taker, then the safe haven status will be lost, and the currency will revert to where they want or possibly weaker.
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  #524  
Old 16.08.2011, 21:46
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Re: Swiss Franc Climbs to Record High

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B) The SNB tried to manipulate the market by speculation & failed. If you don't have the balls to speculate, don't try it. It's not for the risk averse 'Swiss'

C) All markets work to make money, thats all, for every winner there is a looser. Selling all of CH gold's reserves & heavilly shorting gold would do the trick, they would probably be able to buy back the gold @ 850 or less in a few days.
The problem with central banks is they want to meddle rather than make money so they will always loose. The SNB has to be seen as a risk taker, then the safe haven status will be lost, and the currency will revert to where they want or possibly weaker.
B) the SNB last year did not intervene in the finance-markets long enough, and tried to fix things by purchasing Euros without increasing the internal money circulation. When they now started to increase the money mass, the success came. They will to continue with this for several weeks, to achieve something. And at worst will have to purchase even more Euros.
B-2) The SNB was forced to act and will be forced to continue
C) Central Banks are NOT commercial banks.
C-2) The risk the SNB now has to take is an increase of inflation. To sell gold would not achieve anything, due to the volume of gold-reserves here.
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  #525  
Old 16.08.2011, 21:53
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Re: Swiss Franc Climbs to Record High

if the swiss want the lifestyle and currency of the PIIGS, they can simply move to one of those countries. there's no need to do things the hard way and turn switzerland into a PIIG through bad monetary policy.
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  #526  
Old 16.08.2011, 22:24
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Re: Swiss Franc Climbs to Record High

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What works since then is the additional "money printing" of the SNB. Lower interest rates is another side, but not as easy to manage.
No. The talk of the peg is what worked. Money has been flowing into Swiss francs to preserve capital value. Interest rate? Cut them to zero. Tax interest of foreign deposits? Fine. Nobody cares. As long as the sovereign debt crisis reigns, money will still flow into Swiss francs because, along with Norwegian kroner, there aren't many choices. Nobody likes the $, Euro or £. This is about preservation of capital, not return on capital.

And before anybody chimes in with chinese rmb, the amount of trade flows in rmb is tiny. There is much more trade in HK$ than rmb, and that is pegged to USD.

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THIS time, the SNB has the backing from the Federal Council and ALL major parties, which is a difference to what it was last time.
True, and if this results in a peg and the will to defend it, whatever the cost to the SNB's balance sheet, then that will make a big difference.

But, and this is a big but, there is a major disconnect between the politicians (be that Swiss, European and American) and the people who move financial markets. Financial markets will react when politicians walk the talk.

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"The markets are not convinced" ? What markets ? If you mean the finance-markets then of course yes, the SNB will be forced to act. But the export-markets already do react positively with new orders. I hope that also the markets of the inbound-tourism react positively.
I don't understand this. You can't disconnect the FX market from exports or tourism. If the export markets were unaffected, then there would be no talk of a peg. It's simple. So far exporters have been eating the currency impact and accepting lower profits. That is not sustainable. Either the Swiss franc weakens or exportsand tourism falter. The SNB has to do, not talk. They have to do something that demonstrates the days of the Swiss franc as a safe haven are over.
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  #527  
Old 16.08.2011, 23:17
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Re: Swiss Franc Climbs to Record High

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Whether you describe the "flow" of money as "speculation" or "moves out of fear" does not matter.
It matters when the Swiss franc ceases to be simply a currency and becomes a commodity.
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  #528  
Old 17.08.2011, 00:39
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Re: Swiss Franc Climbs to Record High

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B) the SNB last year did not intervene in the finance-markets long enough
B)
C-2) The risk the SNB now has to take is an increase of inflation. To sell gold would not achieve anything, due to the volume of gold-reserves here.
The SNB dont have the resources to short the CHF without huge gearing to make any difference, they have to be prepaired to risk bankrupting the country for the markets to be frightened. They made a loss & now run scared.

Selling 100% of the gold & going short by 200% would do the trick, it must be all sold at best within 1 hour regardless of price. Or are you saying CH gold reserves are so small there irrelivent?

Gold price would plummet , the market would go crazy, CH could repurchase the short possitions. Whilst such trading would probably be hugely profitable CH would loose it's safe haven status, this is whats needed, then the currency will loose it's premium.
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  #529  
Old 17.08.2011, 01:13
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Re: Swiss Franc Climbs to Record High

it is not worth destroying the country to support exporters. especially since the exporters will be destroyed with the country.
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Old 17.08.2011, 01:27
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Re: Swiss Franc Climbs to Record High

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Selling 100% of the gold & going short by 200% would do the trick, it must be all sold at best within 1 hour regardless of price. Or are you saying CH gold reserves are so small there irrelivent?

Gold price would plummet , the market would go crazy, CH could repurchase the short possitions. Whilst such trading would probably be hugely profitable CH would loose it's safe haven status, this is whats needed, then the currency will loose it's premium.
Famous last words my friend... FLW!

Such a gamble would probably bankrupt the country rather than be hugely profitable! And in fact only then would the currency lose it's safe haven status! It clearly wouldn't lose it's safe haven status if the gamble made them money!

Anyway the whole Swiss Frank thing has nothing to do with the value of Gold and all to do with the stable Swiss economy and the fear gripping everyone outside of it!

The peg is likely to be the solution at least for the short to medium term and we will know for sure in a few hours when we wake up today! All we know now though is that buying the rumour (peg at 1.15) would have paid off big time! Considering it was trading below 1.05 less than a week ago!
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Old 17.08.2011, 02:44
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Re: Swiss Franc Climbs to Record High

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if the swiss want the lifestyle and currency of the PIIGS, they can simply move to one of those countries. there's no need to do things the hard way and turn switzerland into a PIIG through bad monetary policy.

The monetary policy WAS bad until a short while ago but now has improved clearly, with the SNB doing its duty

************************************************** *************************************

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No. The talk of the peg is what worked. Money has been flowing into Swiss francs to preserve capital value. Interest rate? Cut them to zero. Tax interest of foreign deposits? Fine. Nobody cares. As long as the sovereign debt crisis reigns, money will still flow into Swiss francs because, along with Norwegian kroner, there aren't many choices. Nobody likes the $, Euro or £. This is about preservation of capital, not return on capital.

And before anybody chimes in with chinese rmb, the amount of trade flows in rmb is tiny. There is much more trade in HK$ than rmb, and that is pegged to USD.



True, and if this results in a peg and the will to defend it, whatever the cost to the SNB's balance sheet, then that will make a big difference.

But, and this is a big but, there is a major disconnect between the politicians (be that Swiss, European and American) and the people who move financial markets. Financial markets will react when politicians walk the talk.



I don't understand this. You can't disconnect the FX market from exports or tourism. If the export markets were unaffected, then there would be no talk of a peg. It's simple. So far exporters have been eating the currency impact and accepting lower profits. That is not sustainable. Either the Swiss franc weakens or exportsand tourism falter. The SNB has to do, not talk. They have to do something that demonstrates the days of the Swiss franc as a safe haven are over.
The additional money has been put into circulation in order to bring the CHF down to an acceptable level. The rate went down after the announcement but then up again. It then went down in a remarkable way when the "money printing" had begun.

As long as money flows into the CHF, more CHF have to be printed to outbalance that flow. And the SNB is to resume the purchasing of Euros.

************************************************** *****************************

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it is not worth destroying the country to support exporters. especially since the exporters will be destroyed with the country.

Who wants to destroy the country ? It however is not worth destroying the country with allowing a crazily high exchange rate to support the banks and to support some foreigh finance people. A more or less normal exchange rate is not destroying the country. And a bit more inflation is bearable.

************************************************** *************************

And to refer to the "to peg .......................................", the question will be to what rate exactly. Should it be 1 Euro CHF 1.05 or 1.10 or 1.20 or 1.30 or 1.40 ? And when that "pegging" becomes official at 1.30, to push it through against international finance might be difficult. I think, it should be between 1.10 and 1.20, a higher rate looks unrealistic. Even if the real market-value of the Euro (the actual value it has in countries in the Eurozone) still is approx CHF 1.45 .

Last edited by Wollishofener; 17.08.2011 at 03:03.
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  #532  
Old 17.08.2011, 02:59
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Re: Swiss Franc Climbs to Record High

So is it a good time to transfer most of the Swiss funds to the US and wouldn't this help drive up the USD? Not an economist, just thinking about doing some transfers...any drawbacks to this approach?
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  #533  
Old 17.08.2011, 09:55
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Re: Swiss Franc Climbs to Record High

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It then went down in a remarkable way when the "money printing" had begun.
Is this just a guess? Because I haven't heard of the SNB printing any money...

Source please!

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So is it a good time to transfer most of the Swiss funds to the US and wouldn't this help drive up the USD? Not an economist, just thinking about doing some transfers...any drawbacks to this approach?
Well thinking is your first drawback right there!
If you need dollars what are you waiting for? Until the rate hits 0.5? 0.4? 0.3? it's pretty good at 0.8 so just go on ahead and make some transactions!


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The peg is likely to be the solution at least for the short to medium term and we will know for sure in a few hours when we wake up today! All we know now though is that buying the rumour (peg at 1.15) would have paid off big time! Considering it was trading below 1.05 less than a week ago!
SNB disappoints with no Peg information in it's expected announcement at 08:55 today...

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  #534  
Old 17.08.2011, 10:07
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Re: Swiss Franc Climbs to Record High

I am sad this morning. CHF:EUR = 1.15 ; USD:CHF = 1.25 ; CHF:GBP = 1.31.



I'm starting to wonder if SNB overcorrected.
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  #535  
Old 17.08.2011, 10:15
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Re: Swiss Franc Climbs to Record High

http://www.xe.com/currencycharts/?fr...to=CHF&view=1W

This is the CHF rate going down in a remarkable way on planet wolli
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  #536  
Old 17.08.2011, 10:17
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Re: Swiss Franc Climbs to Record High

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I am sad this morning. CHF:EUR = 1.15 ; USD:CHF = 1.25 ; CHF:GBP = 1.31.



I'm starting to wonder if SNB overcorrected.
XE shows


CHF:EUR = 1.12 ; USD:CHF = 1.27 ; CHF:GBP = 1.29.

At the moment.
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Old 17.08.2011, 10:23
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Re: Swiss Franc Climbs to Record High

war of words continues today:

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The measures taken thus far by the Swiss National Bank (SNB) against the strength of the Swiss franc are having an impact. Nevertheless, the Swiss franc remains massively overvalued. The SNB has therefore decided to expand again significantly the supply of liquidity to the Swiss franc money market. In so doing, it is increasing the downward pressure on money market interest rates with a view to further weakening the Swiss franc exchange rate. With immediate effect, it aims to expand banks’ sight deposits at the SNB further, from CHF 120 billion to CHF 200 billion. In order to achieve this new target level as quickly as possible, it will continue to repurchase outstanding SNB Bills and to employ foreign exchange swaps. Furthermore, the SNB reiterates that it will, if necessary, take further measures against the strength of the Swiss franc.
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Old 17.08.2011, 10:27
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Re: Swiss Franc Climbs to Record High

what others are saying:

"A euro peg is not the easiest step to consider for Switzerland, either politically or legally. Staying out of the euro zone has been Switzerland’s democratic choice," she wrote in a note to clients. "Domestic voters may well feel that measures to support corporate profitability and export diversification via a much laxer fiscal policy would be a better way to spend public funds rather than to turn the SNB into a bad bank and a shadow bailout vehicle for the Euro zone periphery via a peg with the euro."
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Old 17.08.2011, 10:37
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Re: Swiss Franc Climbs to Record High

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I am sad this morning. CHF:EUR = 1.15 ; USD:CHF = 1.25 ; CHF:GBP = 1.31.



I'm starting to wonder if SNB overcorrected.
There goes my plan of a cheap trip to America
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Old 17.08.2011, 10:47
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Re: Swiss Franc Climbs to Record High

So no peg and no Eurobond.
Back to square one. All we got was talk from politicians and a promise of extra liquidity out of the SNB.
With those two uncertainties out of the way, we can look forward to a stronger franc and a weaker Euro.
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