pedro01
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I think that's the point. Trying to buoy your currency on the currency markets is a great way to rid yourself of those pesky foreign reserves.
Virtuoso, a question, the mad as a bag of badgers spike on EUR/CHF...
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I think that's the point. Trying to buoy your currency on the currency markets is a great way to rid yourself of those pesky foreign reserves.
What happens when a country is attempting the opposite?
searchlight
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That is what happening right now with eur/chf . So I think swiss can buck the market as long as they want. Whenever certain level reached, Just print the money buy the Eur to keep the level where you want.
Problem you'll have when you trying to keep your currency strong. As pedro said, you have to use your reserves to buy your own currency. Eventually you will run out of them.
in that sense you can not buck the market for long, it will get you in the end. That is what happened to the GBP on black wednesday. Was it monday?
So does this mean that the Swiss will have a lot of euros and dollars then? Maybe if the market thinks that the Swiss are rolling in money they will want to buy Swiss dollars?
I know very little about the inner workings of central banks and would be pleased if you could find the time to go into this subject in more detail. As a couple of other forum members repped the post then any other expert advice would also be welcome.
searchlight
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Their stated policy is ; they don't want strong CHF against EUR. and they will intervene to prevent it is happening. It seems + 1.50 where they want it. I think their policy geared towards euro(understandably). Dollar side take care itself. Yes, they will have lots of euros if the current policy continuos. And of course Euro can get strong enough ''naturally'' for swiss , not need to intervene. All I am saying is; country that want to keep its currency ''weak'' is in the privilege position as opposed the country that wants its currency ''strong''. Because former will never run out of its own currency to buy reserve currency of their choice.
I am sure that Norman Lamont would agree.
virtuos0
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Basically the timing of the intervention is not linked to any indicator or even necessarily an exact level, but it is done when liquidity providing ECB LTRO's (longer term refinancing operations) are alloted. The next LTRO is on 16 December. So if everyone wants to put 16 December in their diaries feel free
If you want to learn how and why central banks intervene you will need a book on the subject! This one is a real humdinger Amazon.co.uk: central banks
Basically the timing of the intervention is not linked to any indicator or even necessarily an exact level, but it is done when liquidity providing ECB LTRO's (longer term refinancing operations) are alloted. The next LTRO is on 16 December. So if everyone wants to put 16 December in their diaries feel free
If you want to learn how and why central banks intervene you will need a book on the subject! This one is a real humdinger Amazon.co.uk: central banks
Thanks for the link and info. How do the SNB fit in with ECB policy?
Martinghoul
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That's not true. They care about the strength of the Swiss Franc against a basket of world ccies, i.e. the level of trade-weighted CHF. Obviously, EUR has a large weight in the basket, but that doesn't mean that they only buy EURCHF. In fact, in the latest episode, they were on the bid in USDCHF only.
Martinghoul
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That's completely untrue. SNB's interventions have absolutely nothing to do with the ECB LTROs. SNB was intervening in the mkt well before the LTROs started. The fact that the last intervention coincided with the 1y tender is spurious and nothing should be read into it.Basically the timing of the intervention is not linked to any indicator or even necessarily an exact level, but it is done when liquidity providing ECB LTRO's (longer term refinancing operations) are alloted. The next LTRO is on 16 December. So if everyone wants to put 16 December in their diaries feel free
If you want to learn how and why central banks intervene you will need a book on the subject! This one is a real humdinger Amazon.co.uk: central banks
Please feel free to answer. Its not a trick question.
virtuos0
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Last two actually, the previous one was on June 24, and plenty should be read into it. I'm not saying that one guarantees the other, far from it.
Martinghoul
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If this is for me, I have already answered... Specifically, the SNB's intervention decisions have absolutely nothing directly to do with the ECB.
No actually its not, its for virtuos0, but thanks for the reply.
Martinghoul
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Well, let's see...
1) SNB were intervening before the ECB LTROs started
2) Last intervention that coincided with the 12m LTRO was in USDCHF
3) They have intervened on dates that had nothing to do with the LTROs (between the two tenders)
4) You say yourself that one doesn't guarantee the other
5) Fundamentally, I can't think of any reason why the two should be simultaneous
Given all this, I just don't see any evidence that the two interventions on LTRO days are anything more than a coincidence.
is it possible to explain why please? I am very interested in your opinions on this subject and also those of Pedro and Glyder who repped this post.
searchlight
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hi Martinghoul,
When I said their ''stated policy'' I was referring to this. I highlighted the bits I was referring to.
regards,
UPDATE: Swiss Central Bank Sounds Deflation Alarm, Targets Franc
By William L. Watts
LONDON (Dow Jones) -- The Swiss National Bank on Thursday said it would take exceptional steps to prevent a deflationary spiral, including intervention in foreign-exchange markets to arrest the Swiss franc's rise versus the euro.
As expected, central bank policymakers decided at their regular meeting to cut the SNB's key lending rate and narrowed the target range for three-month Libor by 25 basis points to a range of 0% to 0.75%. The SNB said it would use "all means at its disposal" to bring the Libor rate down to the lower end of the range at approximately 0.25%.
The Swiss franc, meanwhile, tumbled after the SNB said it would wade into currency markets to halt the Swiss franc's long-running rise versus the European single currency. The franc has been on the rise versus the euro since the global financial crisis took hold in August 2007, and has accelerated its momentum since last December, the central bank said.
"Under the present circumstances, this represents an inappropriate tightening of monetary conditions," the SNB said in its statement. "In view of this development, the SNB has decided to purchase foreign currency on the foreign exchange market, to prevent any further appreciation of the Swiss franc against the euro."
The euro soared versus the franc, jumping 3.2% to $1.5269 francs, its highest level against the Swiss unit since December.
The bank also slashed its growth forecast and said it now expects real gross domestic product to fall by 2.5% to 3% in 2009, compared to a previous forecast for a contraction of 0.5% to 1%.
The bank also expects a negative inflation rate of 0.5% in 2009, followed by a rate of around 0% in 2010.
A more severe deterioration of the economy could result in negative inflation, the central bank said, warning that a "period of negative inflation is not compatible with the objective of maintaining medium-term price stability. Any tightening of monetary conditions is inappropriate in this depressed environment," the SNB said.
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: Dow Jones NewsPlus - Login. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
March 12, 2009 09:51 ET (13:51 GMT)
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virtuos0
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I agree with everything you say except point 2, it certainly wasn't solely in USD. I'd be interested to hear GammaJammers opinion on the correlation.
glyder
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Pob,
I'm a bit 2 sheets to the wind right now but I'l ltry my best, basically, them, I know the ways of folks in the big banks, I've been in a few, and in my experience they could nt care less about MA's or many other tech indicators either. They barely know about them from one week to the next. (yes they may know the theory but they dont' care about it and it don't influence their reasoning, they've probably forgotten it exists).
Levels (horizontals) against the euro, gold and $ are what I suspect concern them.
But still whatever's on their minds, it don't affect my trading.
But actual price levels, yes. I think they pay attention to that. Because they are numbers. And those make sense to their way of thinking.
Just my experience.
I'd never really paid that much attn to this its just stuff inmy head, just back of my mind type stuff, cos it don't matter at all to my trading, but when I read Virt0's post, this all clicked in my head and made me try to imagine the board of a big bank or a central bank eg the SNB;s head of currency manipulation dept scrutinising the 200MA as if there is a holy grail within that will save their currency, like if they just try to buck the 200MA they will have fooled and beaten the market and strengthened their currency.mission fulfilled.
That picture just don't convince me.
Thats why I gave the rep.
Of course I'm not in the SNB and perhaps the 200MA is their real big thing. But I'd bet against it.
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