The trials and tribulations of the Swiss may seem piffling compared with the woes of their eurozone neighbours.
But the franc’s strength, coupled with weak global demand, is hurting the country’s businesses. This from the FT’s Haig Simonian:
Exporters, hoteliers and retailers have howled as the strong currency has hurt sales. Hotel booking have plunged and look set to drop further in the winter season as foreign tourists stay away. Retailers have seen shoppers defecting across the border and exporters say they have retained market share only by slashing margins or even selling at a loss.
The Swiss National Bank’s decision to keep the floor on the franc’s appreciation against the euro constant at Sfr1.20 today will have no doubt disappointed them. Especially when there were many reasons for the central bank to act.
The SNB has instead favoured a wait-and-see approach, hoping that the eurozone turmoil doesn’t worsen and that the franc’s depreciation against the single currency continues of its own accord.
But the central bank suggested that, if the franc does not weaken further against the euro in the coming months, then it is likely to act. Read more
Our week ahead email helps you track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe
The highlight of next week’s calendar is Tuesday’s Federal Open Market Committee meeting.
Here’s the FT’s US economics editor Robin Harding on what to expect: Read more
Now that the Swiss National Bank has said it will cap the franc’s appreciation against the euro, investors are on the lookout for a new safe haven currency.
Attention has turned to the Norwegian krone, with the currency hitting an eight-and-a-half year high of NKr7.4825 against the euro on Wednesday.
Though Øystein Olsen, the governor of Norges Bank, was clear that the central bank would not for now intervene, he did acknowledge that an appreciation could weaken domestic growth.
With interest rates at 2.25 per cent, the central bank has room to loosen policy if the krone’s appreciation proves too heady. But – some argue – it may not have to bother. Read more
The European Central Bank distanced itself on Tuesday from the Swiss National Bank’s plans to combat the overvalued franc by linking it to the euro. With the SNB likely to acquire substantial piles of euro assets as a result of its intervention, one fear is that it will worsen tensions in eurozone debt markets by buying only AAA bonds. Italy’s spreads versus Germany would rise further.
But maybe it would be in the SNB’s interest to help the ECB? By buying lower quality bonds, the Swiss central bank could display a level of recklessness that might convince financial markets of its determination to do whatever is necessary to weaken the franc. Moreover, given the franc is now linked to the euro, the SNB has a greater interest in a stable eurozone. “What would be great now would be if the SNB bought €50bn in Italian bonds – it would be good for everyone,” quipped one trader.
It was a while coming, but the Swiss National Bank has finally done what was needed for it to have a decent chance of halting the franc’s appreciation.
The SNB on Tuesday said it would set a minimum exchange rate of Sfr1.20 to the euro. In order to maintain the peg, it is prepared to buy foreign currency “in unlimited quantities”. Though this could well result in steep paper losses – and so anger its owners, the SNB is right to act.
There are two reasons why. Read more
When confidence is shot, policy must get ahead of the curve if it is to count. Do less than markets expect, and there is a decent chance that measures will have the opposite impact to what policymakers were hoping for.
Which is one of two reasons why the Swiss National Bank’s latest move to counter the franc’s appreciation has backfired. This from the FT’s Peter Garnham:
The Swiss franc rose sharply on Wednesday after the Swiss National Bank’s latest attempts to stem strength in its currency disappointed investors.
The Swiss franc climbed 1.4 per cent to SFr1.1318 against the euro, added 1.5 per cent to SFr0.7848 against the dollar and gained 1.7 per cent to SFr1.2886 against the pound.
A week is a long time in currency markets. Seven days after the Swiss National Bank announced a set of measures to curb the franc’s rise, it is at it again.
Analysts were unconvinced last week’s measures would work. They are sceptical this time around too. It is also unclear what other policy options the central bank has.
The SNB said this morning that it was injecting another Sfr40bn-worth of liquidity by expanding banks’ deposits held at the central bank. It would also conduct foreign-exchange swap transactions in a further bid to increase Swiss franc liquidity. The move came after the franc shot up by – at one point – more than 6 per cent on Tuesday after the Federal Reserve’s committed to keep rates on hold for the next two years, though the Swiss authorities were already considering action. Read more
The Swiss franc has gone a little bonkers in the past few weeks.
The franc was already at record highs as a result of the eurozone crisis. But the shambles in the US and recent suggestions Japan will intervene to stem the yen’s gains have accelerated the pace of the Swiss currency’s gains.
Concerned that this will only add the woe of the country’s exporters, the Swiss National Bank today took action. But in such uncertain times, even saying you will cut rates “as close to zero as possible”, and pledging to intervene if appreciation continues, counts for little. This from the FT’s Peter Garnham: Read more
The Swiss franc is close to record highs against the euro, trading today at 1.3103, just shy of July’s record high of 1.3070.
Location and stability are giving the currency a double boost, say analysts. Read more
If rumour is true, things are looking up for the 100,000 Hungarians more than 90 days past their mortgage due date. What’s left of Hungary’s international loan may end up in a mortgage-relief fund, intended to allow people to rent their homes, reports Reuters.
The new fund – reported in daily Magyar Hirlap and not yet confirmed by officials - would buy property (that would otherwise stand to be repossessed) from commercial banks, allowing mortgage-holders to rent the property. The paper also said that the bad loans of households would be replaced by state loans, though it did not name a source. Read more
Strong inflation data for April seems to have reassured the Swiss central bank into allowing the franc to strengthen to a new all-time high against the euro.
The franc has been strengthening all year, with the Swiss central bank often rumoured to have intervened, selling francs. Central bank governor, Philip Hildebrand, has previously stated a policy of intervention to counter “excessive appreciation”, but the bank never confirms individual cases. More on ft.com.
One Swiss franc can buy more euros than at any time since the launch of the currency in 1999. At 15.47 today, the currency traded at 1.4309, breaking its previous record of 1.4315 reached in October 2008.
Significant strengthening occurred last week, following comments from central bank board member Jean-Pierre Danthine. Read more
Rumours and anecdotal evidence of a shift in Swiss currency policy have been backed up by the comments of a Swiss National Board member. Read more
Is the Swiss National Bank allowing its currency to appreciate?
It may be coincidence, but the three previous times we reported rumours of bank intervention in the forex markets, the level at which they appeared to intervene was about 0.684 EUR per CHF (1, 2, 3). Read more
The Swiss National Bank has issued a characteristic response to questions of market intervention to weaken the Swiss franc: “We’re not commenting on that,” a spokesman told Reuters. Some traders had reported market activity by the bank, although it’s not conclusive from the chart when compared to the spike last Tuesday, when similar rumours were reported.
Traders say the Swiss National Bank was seen in Asian markets selling francs and buying euros. This would fit with Phillip Hildebrand’s stated policy of intervention to prevent excessive appreciation of the franc, which could harm Switzerland’s economic recovery. The SNB declined to comment. (Reuters)
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The Swiss franc has dropped 0.2 per cent amid speculation that the central bank sold the currency for the second time today. The central bank refused to comment. It is thought the francs bought euro.
The Swiss franc has been appreciating significantly against the euro. New central bank governor Philip Hildebrand has a stated policy of intervention where necessary to prevent ‘excessive appreciation’ of the franc, which has risen by 0.9 per cent against the euro since the start of the year. Read more
Eastern Europe is looking for ways to reduce dependence on loans denominated in foreign currencies, particularly the euro and Swiss franc.
Officials at the EBRD meeting in London this weekend agreed to find ways to develop local currency markets in order to reduce dependence on foreign currency credits. Officials are not looking to regulate but to encourage voluntary moves by banks to tighten rules on foreign currency loans. Officials plan to meet again early next year, preparing concrete proposals by spring. Read more