Below is an article pubpished in Finacial Times last week :
The Swiss franc fell to its weakest level in 20 months as traders took advantage of the improved sentiment in Europe to dump what has been one of the most popular havens for investors during the eurozone crisis.
The move sent the franc to its lowest level since the Swiss National Bank intervened in the currency markets in September 2011 in an effort to protect its exporters from heavy inflows into Switzerland by overseas investors.
The
central bank has vowed to buy as many euros as it takes to prevent the
franc from moving below SFr1.20 against the single currency. The euro
rose close to SFr1.25 on Thursday as it continued to build on sharp
gains against the franc after the European Central Bank signalled a more
positive outlook on the eurozone last week, giving an instant boost to
global risk appetite.
Currency traders said that while hedge funds were behind the initial move away from the franc, institutional investors and private wealth managers had also begun moving money out of Switzerland in search of higher-yielding assets.
“Investors have been moving out of Switzerland since Mario Draghi spoke,” said Bob de Groot, a currency trader at BNP Paribas, referring to a press conference last week by the ECB president.
Mr Draghi said on Thursday last week that the central bank was observing “normalisation” of financial market conditions in the eurozone and he expected the currency bloc to see an economic recovery this year. Currency investors said the franc remained too expensive at its current levels even after losing more than 3 per cent of its value in the past week.
“Anyone who has bought a cup of coffee in Switzerland knows that the Swiss franc is grossly overvalued,” said Stephen Jen, head of SLJ Macro Partners, the currency hedge fund. “The long-term fair value for the franc is closer to SFr1.35-1.40.”
The strength of the franc has been a headache for the SNB, which accumulated record foreign currency reserves last year as it battled inflows from overseas investors. The central bank held SFr427bn ($457bn) in overseas currencies at the end of December, giving it the fifth largest stockpile of foreign currency reserves in the world.
So far, the franc policy has been profitable for the central bank, which on Thursday said it made a profit of about SFr6bn in 2012, SFr4.7bn of which was due to a rise in the value of its foreign exchange reserves.
However, analysts have warned that the size of the foreign exchange reserves that the SNB has amassed in defending the minimum exchange rate means that in future, its profits are likely to be increasingly volatile, with tiny fluctuations in exchange rates potentially leading to huge gains or losses.
The recent fall in the franc has also prompted speculation that the SNB could seek to offload some of its vast stockpile of foreign currency reserves to lock in profits from the currency moves.
By Alice Ross in London and James Shotter in Zurich
http://www.ft.com/intl/cms/s/0/0c0c758c-60c9-11e2-b85b-00144feab49a.html#axzz2IGf6AQTH
The Swiss franc fell to its weakest level in 20 months as traders took advantage of the improved sentiment in Europe to dump what has been one of the most popular havens for investors during the eurozone crisis.
The move sent the franc to its lowest level since the Swiss National Bank intervened in the currency markets in September 2011 in an effort to protect its exporters from heavy inflows into Switzerland by overseas investors.
Currency traders said that while hedge funds were behind the initial move away from the franc, institutional investors and private wealth managers had also begun moving money out of Switzerland in search of higher-yielding assets.
“Investors have been moving out of Switzerland since Mario Draghi spoke,” said Bob de Groot, a currency trader at BNP Paribas, referring to a press conference last week by the ECB president.
Mr Draghi said on Thursday last week that the central bank was observing “normalisation” of financial market conditions in the eurozone and he expected the currency bloc to see an economic recovery this year. Currency investors said the franc remained too expensive at its current levels even after losing more than 3 per cent of its value in the past week.
“Anyone who has bought a cup of coffee in Switzerland knows that the Swiss franc is grossly overvalued,” said Stephen Jen, head of SLJ Macro Partners, the currency hedge fund. “The long-term fair value for the franc is closer to SFr1.35-1.40.”
The strength of the franc has been a headache for the SNB, which accumulated record foreign currency reserves last year as it battled inflows from overseas investors. The central bank held SFr427bn ($457bn) in overseas currencies at the end of December, giving it the fifth largest stockpile of foreign currency reserves in the world.
So far, the franc policy has been profitable for the central bank, which on Thursday said it made a profit of about SFr6bn in 2012, SFr4.7bn of which was due to a rise in the value of its foreign exchange reserves.
However, analysts have warned that the size of the foreign exchange reserves that the SNB has amassed in defending the minimum exchange rate means that in future, its profits are likely to be increasingly volatile, with tiny fluctuations in exchange rates potentially leading to huge gains or losses.
The recent fall in the franc has also prompted speculation that the SNB could seek to offload some of its vast stockpile of foreign currency reserves to lock in profits from the currency moves.
By Alice Ross in London and James Shotter in Zurich
http://www.ft.com/intl/cms/s/0/0c0c758c-60c9-11e2-b85b-00144feab49a.html#axzz2IGf6AQTH
Δεν υπάρχουν σχόλια:
Δημοσίευση σχολίου