AN INTERESTING ARTICLE ON THE CHF FROM THE WSJ

Below is a very interesting article which i found in the wall street journal last week 

"After hibernating for months, the Swiss franc is starting to stir.

The franc's recent move lower, a more than one-cent drop against the euro over about a week, comes as the currency pair has barely budged this year. Outside of a few isolated trades, the franc hasn't strayed by more than a few hundredths of a cent from 1.20 francs to the euro, the strongest level Switzerland's central bank says it will allow.Trading volume in the euro-franc pair hit a record on Wednesday on the CME. Above, a bank worker counts Swiss francs.

This floor, put in place a year ago to avoid deflation and protect Swiss exporters, froze what was previously one of the world's most heavily traded currencies. A stronger franc makes goods sold abroad more expensive. Since then, investors either bought the franc as a haven from Europe's debt problems or as a bet the Swiss National Bank's floor would fail. Mostly, they avoided the currency entirely. 

With the franc on the move, the currency is regaining its broad appeal."Two months ago, when the euro was on its knees, euro-Swiss was basically a one-sided trade," said Steven Englander, global head of G-10 currency strategy at Citigroup. "If we stay in this range above the SNB's floor, it will become a tradable pair again."

The franc retreated this month as the outlook for Europe improved. In July, European Central Bank President Mario Draghi said he would do "whatever it takes" to save the euro. And on Sept. 6, the ECB said it would buy sovereign bonds to lower borrowing costs for countries that asked for help.

Trading volume in the euro-franc pair immediately climbed, with a record 8,253 contracts trading Wednesday on the Chicago Mercantile Exchange. The number of contracts outstanding hit an all-time high of 11,847 on Wednesday, up 78% since before Mr. Draghi spoke in July. Futures contracts are a small part of the foreign-exchange market but often reflect activity in the far larger spot market.

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Late Thursday in New York, the franc traded at 1.2148 against the euro, its weakest since Jan. 9, compared with 1.2090 francs late Wednesday.

"A lot of people cashed out on this" drop in the Swiss franc, said Tom Liravongsa, co-founder of Michigan-based Holland Global Trading LLC. He said his firm placed short-term bets that the euro would rise against the franc ahead of the ECB's meeting Sept. 6 but has since pulled back.

Some investors are staying on the sidelines."We won't take a position right now," said Bob Marcellus, president and founder of Richmond Optimus, which manages about $100 million in assets for sovereign-wealth funds, banks and pension funds. "The risk-reward opportunity is just not there." He said he expects the SNB's floor for the euro to give way eventually, but it's "not likely to happen for a while. Their central bank is healthier than most."

Analysts and investors said the fact that the franc—perceived as one of the most attractive shelters in times of uncertainty due to Switzerland's stable finances and relatively strong economy—is finally slipping from its perch is a clear vote of confidence in the ECB's latest plan to provide relief to bond markets.But the SNB's next move matters as well. 

The euro's jump takes some of the pressure off the SNB, which has been forced to expand its balance sheet, buying euros to keep the common currency above the 1.20-franc floor. The central bank has accumulated 476.3 billion Swiss francs ($508.2 billion) in foreign reserves through July, a 50% increase since August, before it announced the floor in September.

On Thursday, the SNB kept its floor unchanged at a policy meeting. SNB President Thomas Jordan said the bank would use "utmost determination" to defend the 1.20 francs-to-euro minimum exchange rate. Switzerland's economy also is showing signs of fatigue, contracting in the second quarter as exports to the euro zone declined. That means the central bank isn't likely to abandon its defensive policy soon. Some analysts and investors believe the SNB eventually will raise its floor now that the franc is sliding. "A small break is blessed relief [for the SNB], but it's far from a victory," said Christopher L. Cruden, chief executive at Insch Capital Management in Lugano, Switzerland. His firm trades currencies for large banking clients and took a short-term bet this week that the euro will gain further against the Swiss franc."

 http://online.wsj.com/article/SB10000872396390444023704577649650388222164.html