FX fundamental analysis
March 2009. Wi th an unexpe cted inter vent ion, the SNB manag ed to l i f t Eur/Chf f rom 1.48 to 1.54 in a couple of ses s ions . Af ter such a move and expl ici t de clarat ions of want ing to “prevent Franc appreciation” ( later on changed in “exces s ive appre ciat ion”) purchases of Euros cont inued
held, around 1.50. But in 2010, wi th the Eurozone problems s tar t ing to g et out of control and wi th the consequent ly wor sening prospe ct s for the Euro, the SNB inter vent ion be came les s and les s ef fe ct ive. During the las t couple of months the y ramped up purchases tr ying to defend
the SNB is now the seventh-largest holder of reserve assets globally ahead of Hong Kong, Brazil, India and the ECB
somehow shocked the market by announcing that , as a resul t of i t s inter vent ion in the foreign exchang e market s , i t s currenc y reser ves leapt more than 50% las t month, f rom 145.6 bio Usd in Apri l to 218.8 bio Usd in May. As a resul t , the SNB i s now the seventh- larg es t holder of reser ve as set s g loba l ly, ahead of Hong Kong , Bra zi l , India and the ECB as wel l . To put the f igures into per spe ct ive, there have be en only two months when China , the world largest holder of forex reser ves wi th 2,249 bio Usd in as set s , saw i t s reser ves increase more than Swi tzerland’s 73.2 bio Usd r i se in May. Despi te these mass ive purchases the Swi s s Franc has appre ciated about 3% on a trade-weighted bas i s and 6.5% ag a ins t the Euro s ince the beg inning of 2010. Moving i t around we could actua l ly say that the s treng th of the currenc y has be en the cause of the s ize of inter vent ion wi th the SNB desperately tr ying to avoid appre ciat ion in an otherwi se even much s trong er currenc y.
W
in earnes t any t ime the cros s was s tar t ing to move lower. Ini t ia l ly and for the whole of 2009, s tabi l ization resul t s were remarkable : i t looked l ike a l ine in the sand was drawn and
22 FX TRADER MAGAZINE July - September 2010
1.4315 at f ir s t and later 1.4000. According to the trading communi t y, mas s ive amount s of Euros were bought : severa l bi l l ions per day for several days . On Tuesday June 8th the SNB
hat is dr iving this s trength ?
The Swi s s e conomy, af ter over a year s ince the wor s t re ces s ion period, appear s in bet ter shape than mos t of i t s European neighbor s . Whi le GDP for Q1 di sappointed, the countr y has relat ively low unemployment ,
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