INVESTORS DUMP SWISS FRANC AS EURO RISES -FT

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

TRADE IDEA FOR THIS WEEK- LONG AUDUSD - OPENED @ 1.0540- STOP LOSS HIT ( -140 PIPS)

I will buy 0.1lot  of AUDUSD at the opening  of the market . (1.0540)

My Stop loss is  1.04  and my Take Profit  is 1.0750

28/01/2013---> My trade hit the stop loss

G14 OUTLOOK FOR THE WEEK 13 JAN - 18 JAN

The  most important  data  in the week ahead will be the Chinese GDP release  on Thursday which will  have a  heavy  inpact ont the commodities  and AUD

EURUSD: Clearly  bullish bias .The pair finished the week strong.It is reaching some very strong technical levels  between 1.3380-1.3500.

EURJPY:   The pair is in a bullish  frenzy run. The main resistance is 123

EURAUD: The pair is taking advantage of the rise in euro. Bullish bias but it hasnt yet managed to establish a strong uptrend

EURCHF: The pair is showing some  signs of lfe . Also taking advantage of the strong bullish sentiment on euro

USDCHF:  Remains stil reversed correletaded with the eurusd

GBPUSD: Not a clear picture on this pair. It remains in a range between 1.58-1.63 . However i am slightly bear

USDJPY: Buliish targeting  90 -94

AUDUSD: The pair  is still trapped in a range  .  However, indicators  are becomeng extremely  bullish 

  

INSIDE THE RISKY BETS OF CENTRAL BANKS

Below is a another interesting artilcle  of general knowledge from WSJ written by Jon Hilsenrath published on the 12/12/2012

BASEL, Switzerland—Every two months, more than a dozen bankers meet here on Sunday evenings to talk and dine on the 18th floor of a cylindrical building looking out on the Rhine.

 

The world's major central banks are embarking on an aggressive new phase of policy activism, a course fraught with economic and political risks. WSJ's Jon Hilsenrath reports on the News Hub. 

Photo: AP Images.

The dinner discussions on money and economics are more than academic. At the table are the chiefs of the world's biggest central banks, representing countries that annually produce more than $51 trillion of gross domestic product, three-quarters of the world's economic output.

View Interactive

Of late, these secret talks have focused on global economic troubles and the aggressive measures by central banks to manage their national economies. Since 2007, central banks have flooded the world financial system with more than $11 trillion. Faced with weak recoveries and Europe's churning economic problems, the effort has accelerated. The biggest central banks plan to pump billions more into government bonds, mortgages and business loans.

Their monetary strategy isn't found in standard textbooks. The central bankers are, in effect, conducting a high-stakes experiment, drawing in part on academic work by some of the men who studied and taught at the Massachusetts Institute of Technology in the 1970s and 1980s.

While many national governments, including the U.S., have failed to agree on fiscal policy—how best to balance tax revenues with spending during slow growth—the central bankers have forged their own path, independent of voters and politicians, bound by frequent conversations and relationships stretching back to university days.

If the central bankers are correct, they will help the world economy avoid prolonged stagnation and a repeat of central banking mistakes in the 1930s. If they are wrong, they could kindle inflation or sow the seeds of another financial crisis. Failure also could lead to new restrictions on the power and independence of central banks, tools deemed crucial in such emergencies as the 2008-2009 financial crisis.

"Will history decide they did too little or too much? We don't know because it is still a work in progress," said Kenneth Rogoff, an economics professor at Harvard and co-author of a book, "This Time Is Different," examining financial crises over eight centuries. "They are taking risks because it is an experimental strategy."

The U.S. Federal Reserve now buys $40 billion of mortgage-backed securities each month and appears set at a meeting Wednesday to spend billions more on Treasury securities. The Bank of England has agreed to funnel billions of pounds to businesses and households through banks. The European Central Bank pledged to hold down borrowing costs of governments that sought help. The Bank of Japan, under increased pressure to fight deflation, is purchasing ¥91 trillion yen ($1.14 trillion) in government bonds, corporate debt and stocks.

The goal is to lower borrowing costs and stimulate stock markets to encourage spending and investment by households and business. But the method is untested on such a global scale, and central bankers have labored in behind-the-scenes meetings this year to size up the risks. 

A day after their June dinner here, the central bankers were warned by one of their hosts in a speech to the group. 

"Central banks find themselves caught in the middle, forced to be the policy makers of last resort. They are providing monetary stimulus on a massive scale," said Jaime Caruana, general manager of the Bank for International Settlements, where the dinners are held. "These emergency measures could have undesirable effects if continued for too long."

Another worry: Boosting stock markets and easing credit costs allow national governments to postpone difficult political decisions to fix such problems as swelling budget deficits, according to this contrary view. 

Vocal critics include economists at the BIS, an international body based here that is increasingly an important staging ground for talks about the postcrisis financial landscape. They say central banks, seeking faster growth, are stretched too thin.

"Central banks cannot solve structural problems in the economy," said Stephen Cecchetti, who runs the BIS monetary department. "We've been saying this for years, and it's getting tiresome."Central banks control the spigot of the world's money supply. When opened, the flow of new cash heats up economies, driving down interest rates and unemployment but risking inflation. Closing the spigot, on the other hand, raises interest rates and cools economies but tamps down prices.

The central bankers have promised that once the global economy gets back on its feet, they will shut off the spigots quickly enough to forestall inflation. But pulling back so much money, at exactly the right time, could become a political and logistical challenge."We're all very conscious that we're in an environment that's unusual and we're using a policy weapon that we don't have a lot of experience with," Charles Bean, deputy governor of the Bank of England said in an interview.

Central bankers themselves are among the most isolated people in government. If they confer too closely with private bankers, they risk unsettling markets or giving traders an unfair advantage. And to maintain their independence, they try to keep politicians at a distance. Since the financial crisis erupted in late 2007, they have relied on each other for counsel. Together, they helped arrest the downward spiral of the world economy, pushing down interest rates to historic lows while pumping trillions of dollars, euros, pounds and yen into ailing banks and markets.

Three of the world's most powerful central bankers launched their careers in a building known as "E52," home to the MIT economics department. Fed Chairman Ben Bernanke and ECB President Mario Draghi earned their Ph.D.s there in the late 1970s. Bank of England Governor Mervyn King taught briefly there in the 1980s, sharing an office with Mr. Bernanke.

Many economists emerged from MIT with a belief that government could help to smooth out economic downturns. Central banks play a particularly important role in this view, not only by setting interest rates but also by influencing public expectations through carefully worded statements.

While at MIT, the central bankers dreamed up mathematical models and discussed their ideas in seminar rooms and at cheap food joints in a rundown Boston-area neighborhood on the Charles River. 

Over Sunday dinners in Basel, which often stretch to three hours, they now talk of pressing, real-world problems with authority. The meals are part of two-day meetings held six times a year at the BIS. Dinner guests include leaders of the Fed, ECB, Bank of England and Bank of Japan, as well as central bankers from India, China, Mexico, Brazil and a few other countries.

"That is where it really gets down and dirty," said Nathan Sheets, a Citigroup economist and former head of the Federal Reserve's international affairs division. He didn't attend the dinners during his tenure at the Fed but is familiar with them. "Every one of the dinners was important through the crisis."

The Bank of England's Mr. King leads the dinner discussions in a room decorated by the Swiss architectural firm Herzog & de Meuron, which designed the "Bird's Nest" stadium for the Beijing Olympics. The men have designated seats at a round table in a dining area scented by white orchids and framed by white walls, a black ceiling and panoramic views.

"It is a way in which people can talk completely privately," Mr. King said in an interview. "It is a big advantage if you have some feel for how central banks think about questions, what they're likely to do in the future if certain events were to occur." 

Serious matters follow appetizers, wine and small talk, according to people familiar with the dinners. Mr. King typically asks his colleagues to talk about the outlook in their respective countries. Others ask follow-up questions. The gatherings yield no transcripts or minutes. No staff is allowed.

The 18-member group, formally known as the Economic Consultative Committee, has only once issued a public statement: a two-line missive in September, promising to look for solutions in interbank lending markets, responding to allegations that some private banks had conspired to manipulate the Libor interest rate. 

On Mondays after the dinner, the bankers join a larger group of central bankers at a large round table on a lower floor of the BIS building, which is shaped like a rook chess piece. Staff members sit nearby at desks decorated in white leather. 

"These meetings are a very important forum to understand the global situation," said Duvvuri Subbarao, governor of the Reserve Bank of India and a Sunday dinner participant. "People speak freely."

The central bankers often act with the common goal of bringing the world closer to full employment. Other times, though, they are starkly at odds.

In November 2010, for example, the Fed launched a $600 billion bond-buying program known as quantitative easing. A few days later, New York Fed President William Dudley and Fed vice chairwoman Janet Yellen attended a weekend meeting here and were surprised by the furor the Fed's stimulus program had stirred among developing countries, according to people familiar with the talks. Mr. Dudley and Ms. Yellen spent much of the meeting explaining the Fed's actions, as other central bankers raised worries the program would cause inflation or spark an unwanted flood of capital into their markets.

"Every time there is quantitative easing by the Fed, that gets discussed," said Mr. Subbarao. "We all have to reckon with the spillover impact of our policies on other countries." Basel, he said, is the place to air such concerns.

The role of the Bank for International Settlements has broadened since it was formed in 1930 to handle reparation payments imposed on Germany after World War I. In the 1970s, it became the center of discussions on bank capital rules. In the 1990s, it became the meeting place for central bankers to talk about the global economy. 

The central bankers typically stop short of formally coordinating their moves. Mr. Bernanke, Mr. Draghi and Bank of Japan head Masaaki Shirakawa are more focused on domestic challenges. Mr. Shirakawa has often warned others in Basel about the effectiveness of easy money policies, according to people familiar with his statements. That hesitance has made the BOJ an issue in Sunday's Japan elections. Shinzo Abe, the front-runner to become prime minister, has promised to rein in the BOJ's independence and demand more aggressive efforts to end consumer price deflation. 

But as central bankers grapple with doubts and disagreements over reviving the global economy, they form a tightknit fraternity, tied by efforts to manage growth and gird against financial instability. Their relationships play out during conversations by phone and in person. 

 http://professional.wsj.com/article/SB10001424127887323717004578157152464486598.html?mod=WSJPRO_hpp_LEFTTopStories

HAPPY NEW YEAR TO ALL

THE DAY OF THE DOLLAR CRASH

SNB OPEN IN SINGAPORE

The Swiss central bank said Tuesday (18/12/2012) that it plans to open its first branch abroad, in Singapore, to better manage its growing foreign exchange reserves and assets in the Asia-Pacific region.

"A local presence will allow the SNB to extend its coverage of markets in Asia, and will facilitate its round-the-clock operations on the foreign exchange market - for example, to enforce the minimum exchange rate," the Swiss National Bank said in a statement.

The SNB has seen its foreign currency reserves swell in recent years, especially as it implemented in September 2011 an exchange rate floor of 1.20 francs for each euro to keep the currency from strengthening further.

The Swiss central bank said it has sought to diversify its investments, turning to new markets, while Asia's economic importance has grown considerably in recent years.

The SNB said it had looked at a number of locations in the Asia-Pacific region, but settled on Singapore due to its large financial marketplace, sound infrastructure and legal environment, plus proximity to emerging markets.

The branch is scheduled to open in mid-2013, said the SNB, and will have seven staff members.

http://www.snb.ch/en/mmr/reference/pre_20121218/source/pre_20121218.en.pdf