How to understand the SNB hints?
  • How to understand the SNB hints?

    Sergei Glushkov
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    SNBA few days ago the head of the Swiss National Bank (SNB) Thomas Jordan, told Reuters his assessment of the latest dynamics of the currency. Despite the growth of the euro / franc in January to a year and a half maximum 1.2567, Jordan noted that it is still considered too high rate of CHF and hoped to weaken it in the future. But the most interesting, the SNB president said he did not exclude the use of any measures to curb the franc.

    These words again stirred a wave of discussion if the Swiss central bank does not address the possibility of raising the lower limit for the EURCHF pair from the current level of 1.20 to 1.25. Analysts have repeatedly said about the possibility of such a move. Swiss manufacturers aggressively lobbied the idea in 2012 to create added value for their products in the international market. And life itself provides SNB an excellent chance to realize this move easily! The market itself raised a couple of the new boundary – the central bank can only fix it officially, not allowing the return of the euro lower.

    Now the danger of “currency war” between the world’s leading securities, aimed at the artificial devaluation of the currency is actively discussed in the political arena. First of all, “stones” are flying in the Bank of Japan, but the temptation to go this route is at each of the central bank willing to support their country’s economy. Is the declaration made by Thomas Jordan should be understood as a sign that the SNB could not resist this temptation?

    In my view, such a conclusion would be too hasty. I am inclined to consider the words of the president of SNB only as a kind of “verbal intervention”, and not as a prelude to tangible action. 1.20 level security has already cost billions SNB purchases of euro against the franc. And if EURCHF developed downward trend (and it can not be excluded), it will be much more difficult to protect the 1.25 level. In any event, announcing new measures now when Franc himself is decreasing against the euro in the wake of investors from safe-haven assets, it would be imprudent: the real impact of such decisions on the franc would be minimal, but the push to escalate “currency wars” would be significant …

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