The Swiss central banks wants to push the Swiss franc lower against the euro. The flight to quality towards the CHF has made everything but banking uncompetitive. Watchmakers are not happy.
The idea of the SNB is to buy euros and force the exchange rate lower; however, the amount of euro buying necessary is growing beyond anyone's wildest dreams. SNB FX reserves are now above $359 billion from $50 billion just four years ago. The SNB is now the sixth largest holder of FX reserves in the world. These relentless buying as now lead some to call it the "new China" of the FX markets for their currency manipulations.
The idea of the SNB is to buy euros and force the exchange rate lower; however, the amount of euro buying necessary is growing beyond anyone's wildest dreams. SNB FX reserves are now above $359 billion from $50 billion just four years ago. The SNB is now the sixth largest holder of FX reserves in the world. These relentless buying as now lead some to call it the "new China" of the FX markets for their currency manipulations.
The problem is that the SNB does not want to hold euros, so having buying it turns around and becomes a seller of their euro holding.s Who wants euros when you can hold SEK or AUD or CAD or NZD? The impact of selling those euros is that the euro will still go down. This cannot go on forever. The downward pressure on the euro still exists and investors still want to hold CHF.
This is financial insanity. Do the same thing over and over again and expect a different result.
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