The latest buzz coming out from the Sunday newspapers in Switzerland is that the main business lobby group is pushing the SNB to adopt an initial EUR-CHF target range of 1.10 to 1.15. Then the exchange rate target should be brought near 1.20.
One would have thought that the lobby group would go for something higher like 1.30 – March levels – rather than settling on a level not far from spot.
Separately, a story in Germany’s FAZ – posted below – talks about how the SNB probably bought French and German bonds recently to weaken the CHF. Covert intervention but that’s not the way to weaken the CHF. If the SNB buys Bunds and then Bunds rally strongly versus the periphery, then the market becomes more concerned about the periphery and then buys the CHF. So a potential zero sum game.
Wouldn’t it be better for the SNB to say that we want to change the safe haven status of the CHF and in order to do so, we are going to buy loads of periphery debt?
This would probably make me think differently about the CHF.
BN 9/3/2011 21:37: SNB Likely Bought German, French Bonds to Weaken Franc, FAZ Says
By Chris Reiter
Sept. 3 (Bloomberg) — The Swiss National Bank probably bought German and French bonds directly from the market as part of an effort to weaken the franc, Frankfurter Allgemeine Zeitung reported, citing unidentified people in banking.
The recent drop in the Swiss currency against the euro couldn’t stem solely from swap deals, the newspaper said.
A spokesman for the central bank said there were no bond purchases currently as part of the intervention, FAZ reported.
Walter Meier, a spokesman for the SNB, wasn’t immediately available to respond to a request for comment by Bloomberg News in a phone call to the central bank in Zurich.
The European Central Bank purchased recently issued Italian bonds yesterday, the newspaper also reported.
HSBC Global Research