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Snb Sets Franc Floor Versus Euro

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ZURICH (Dow Jones)--The Swiss National Bank Tuesday took drastic action to stem itself against the crippling strength of the Swiss franc, saying it will introduce a floor at 1.2 francs versus the euro.

It also warned of further moves should the Swiss economy suffer from the strong franc.

"The current massive overvaluation of the Swiss franc poses an acute threat to the Swiss economy and carries the risk of a deflationary development," the central bank said in a statement. "The SNB is therefore aiming for a substantial and sustained weakening of the Swiss franc. With immediate effect, it will no longer tolerate a EUR/CHF exchange rate below the minimum rate of CHF 1.20."

The SNB said it will enforce this minimum rate "with the utmost determination and is prepared to buy foreign currency in unlimited quantities." It said that even at this minimum rate the franc's value was still high, but that it should continue to weaken over time. "If the economic outlook and deflationary risks so require, the SNB will take further measures."

The Swiss franc weakened sharply after the SNB announcement, trading at 1.1969 versus the euro after opening at 1.1091. Likewise, the Swiss Market Index spiked sharply, gaining 4.2% in early Tuesday trade.

-By Goran Mijuk, Dow Jones Newswires, +41 43 443 80 47; gorna.mijuk@dowjones.com

(END) Dow Jones Newswires

September 06, 2011 04:29 ET (08:29 GMT)

huge moves going on, never seen this kind of volatility in one day, 8% move in minutes

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"prepared to buy foreign currency in unlimited quantities"

No problem, we will print it in unlimited quantities.

I'm trying to spend my £'s as fast as possible to turn them into building and insulation materials whilst I still can.

<insert cgnao financial mushroom cloud here>

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I guessing this will end up being an epic fail.

The Euro banking system is insolvent. The ECB are spamming new money, buying up bonds of bankrupt nations to keep the banking system afloat, and in so doing are illegally increasing the money supply. This is why Germany is so mad (angry not crazy), they still have the memories of their 1920's inflation, even if there are few alive who experienced it. The trouble with printing money, is that you can never stop, it seems to take all the problems away. And then, after a short time, thanks to your removal of moral hazard, those problems all come back again. You then either print again, or face up to the now bigger problems. Keep printing and you get hyper-inflation.

This is the bind that Europe is in. Total wipeout of the banking sector, or print more money to bail everyone out. They are doing the latter, and now those forward thinkers in Switzerland have decided to tie themselves to a currency that is on the road to hyper-inflation. It's a bit like getting on the Titanic for the journey, after you have hit the iceberg.

Enjoy the ride.

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The Euro banking system is insolvent. The ECB are spamming new money, buying up bonds of bankrupt nations to keep the banking system afloat, and in so doing are illegally increasing the money supply. This is why Germany is so mad (angry not crazy), they still have the memories of their 1920's inflation, even if there are few alive who experienced it. The trouble with printing money, is that you can never stop, it seems to take all the problems away. And then, after a short time, thanks to your removal of moral hazard, those problems all come back again. You then either print again, or face up to the now bigger problems. Keep printing and you get hyper-inflation.

This is the bind that Europe is in. Total wipeout of the banking sector, or print more money to bail everyone out. They are doing the latter, and now those forward thinkers in Switzerland have decided to tie themselves to a currency that is on the road to hyper-inflation. It's a bit like getting on the Titanic for the journey, after you have hit the iceberg.

Enjoy the ride.

And yet on another thread today you are defending Meryn kings right to do exactly the same!

:lol::lol:

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And yet on another thread today you are defending Meryn kings right to do exactly the same!

:lol::lol:

Huh? Perhaps you could show me this thread where I talked about fixing the exchange rate of the pound to the Euro?

And Mervyn King has no right to do this, it would have to be authorised by Parliament.

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Now youre talking... then most importantly

FondueGlamour.jpg

I wonder how many traders just lost their bread in the cheese and have been chucked into the lake with weights tied to their feet? (One of my all time favourites)

fondue.jpg

09_fondue.jpg

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I prefer a raclette cum fondue personally.

Anyway, being no expert on currencies, I thought one of the Swissies issues was that it was in part backed by gold. How fixed is this relationship and therefore how is it affected by priniting if that is indeed what they mean by 'unlimited intervention'. If they did print, would they have to buy more gold to back it? Or would they have to buy gold first? Or there is no fixed relationship.

raclette-fondue-set-gastroback.jpg

Always had my suspicions :ph34r:

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I prefer a raclette cum fondue personally.

Anyway, being no expert on currencies, I thought one of the Swissies issues was that it was in part backed by gold. How fixed is this relationship and therefore how is it affected by priniting if that is indeed what they mean by 'unlimited intervention'. If they did print, would they have to buy more gold to back it? Or would they have to buy gold first? Or there is no fixed relationship.

raclette-fondue-set-gastroback.jpg

Nope, the gold backing was removed a decade ago, its backed by the same as all other currencies, the sweat of the popn (however switzerland does have the largest state gold holdings per head of popn on the the planet by quite a distance which i have no doubt is part of its strength the last couple of years, i guess its seen as a low beta play on gold, but what goes up also comes down/retraces and vice versa.

The chf has had a good run the last 4 years against all western currencies from 2.50 down to 1.15 against GBP, id be suprised if it didnt spend the next couple of years consolidating that move with a retrace back to 1.80ish before continuing but each to their own, some will no doubt see every CHF dip as a buying op, just like gold, they may or may not get their asses handed to them the next two years

Edited by Tamara De Lempicka

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This will be presented by the Swiss authorities as a success and from their point of view right now it is. They can go back to their exporters and say that they are now 7/8% more competitive than yesterday. But once the hype dies down there are many implications from this that are not so good. I was just reading an up to the mark analysis which pointed out the danger of recreating a good situation for the "carry trade" to restart. Yes that is the same carry trade which helped create the problem..

One of the causes of this situation has been the carry trade which mostly took place in the middle of the last decade where both Swiss Francs and Japanese Yen were borrowed heavily in many countries. This depressed the cuurency then and its partial unwind is raising it now. So how is creating the conditions for it again going to help? You see one cause was low interest rates which, ahem, are now negative and the exchange rate has just been reduced by 7/8% making it more attractive here too!

So carry traders have a pegged exchange rate versus the Euro and negative interest rates in what one might consider to be a type of carry trade heaven!

http://www.mindfulmoney.co.uk/wp/shaun-richards/the-ecb-and-the-italian-government-are-playing-high-stakes-poker-so-why-has-switzerland-just-joined-the-poker-players/

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SNB to recycle EUR reserves aqcuired as a result of its new policy into spanish and italian bonds? Money escaping the souther periphery to be recycled right back where it came from.... :lol::lol::lol::lol:

"What does the SNB buy? At end-Q2, reserves were held 55% in EUR, 25% in USD, 10% in JPY, 4% in CAD, 3% in GBP and 3% in other. Of that, the majority was in AAA bonds. We do not want to make suggestions on what the SNB should buy but if it really wants to support EUR/CHF, buying Italian and Spanish debt might not be such a bad idea."

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SNB to recycle EUR reserves aqcuired as a result of its new policy into spanish and italian bonds? Money escaping the souther periphery to be recycled right back where it came from.... :lol::lol::lol::lol:

"What does the SNB buy? At end-Q2, reserves were held 55% in EUR, 25% in USD, 10% in JPY, 4% in CAD, 3% in GBP and 3% in other. Of that, the majority was in AAA bonds. We do not want to make suggestions on what the SNB should buy but if it really wants to support EUR/CHF, buying Italian and Spanish debt might not be such a bad idea."

I've already heard they will be buying Bunds rather than French bonds, I'm sceptical about them buying Italian or Spanish bonds, given their conservative nature and that any losses accrue to the cantons, but in these crazy times (20 sigma event which I don't think has ever been witnessed before in a developed country currency)who the fcvk knows?

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I've already heard they will be buying Bunds rather than French bonds, I'm sceptical about them buying Italian or Spanish bonds, given their conservative nature and that any losses accrue to the cantons, but in these crazy times (20 sigma event which I don't think has ever been witnessed before in a developed country currency)who the fcvk knows?

I suspect their pragmatism will trump money fetishism when the alternative is to see their proud manufacturing sector hollowed out and their banks exposed to a strongly deflating CHF and losses in eastern europe.

But as you said, who knows?

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SNB to recycle EUR reserves aqcuired as a result of its new policy into spanish and italian bonds? Money escaping the souther periphery to be recycled right back where it came from.... :lol::lol::lol::lol:

"What does the SNB buy? At end-Q2, reserves were held 55% in EUR, 25% in USD, 10% in JPY, 4% in CAD, 3% in GBP and 3% in other. Of that, the majority was in AAA bonds. We do not want to make suggestions on what the SNB should buy but if it really wants to support EUR/CHF, buying Italian and Spanish debt might not be such a bad idea."

55% in EUR :blink:

When this jaggernaut reverses, it's going to be brutal

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I suspect their pragmatism will trump money fetishism when the alternative is to see their proud manufacturing sector hollowed out and their banks exposed to a strongly deflating CHF and losses in eastern europe.

Prices (including exchange rates) carry information about scarcity and demand, it's hardly "fetishism" to want that information to be transmitted from one part of the real economy to another without constant meddling by people who think they know better.

Monetary policy that benefits Swiss manufacturing will be at the expense of somebody else (e.g. higher inflation within Switzerland).

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Prices (including exchange rates) carry information about scarcity and demand, it's hardly "fetishism" to want that information to be transmitted from one part of the real economy to another without constant meddling by people who think they know better.

Monetary policy that benefits Swiss manufacturing will be at the expense of somebody else (e.g. higher inflation within Switzerland).

There shouldn't really be any inflation as years of a strengthening CHF have brought little in the way of tangible price reductions and the CHF is still a lot higher than it was a few years back.

That said, any excuse to raise prices and boost profits will be deployed by the retail sector looking to gouge the masses. I doubt that the Swiss public will stand for it though, having been denied the lower-price fruits of a massive currency appreciation.

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That said, any excuse to raise prices and boost profits will be deployed by the retail sector looking to gouge the masses. I doubt that the Swiss public will stand for it though

...as if they have a choice.

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  • 333 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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