21 Jan 2015
Is EUR/CHF 1.00 the new floor for SNB? – Rabobank
FXStreet (Barcelona) - “We assume that the SNB has bought another CHF 10 billion to defend the peg“, quotes Emile Cardon of Rabobank, and further notes that SNB might try to stabilise the EUR/CHF pair at 1.00 levels.
Key Quotes
“Following the discontinuation of the peg, the immediate reaction in the market was a very sharp drop in EUR/CHF with the currency pair trading at 0.85 at some point. However, in the accompanying document the SNB said that it will remain active in the foreign exchange market to influence monetary conditions and we think this is what they did only fifteen minutes after the announcement.”
“In the days after the announcement EUR/CHF stabilised around parity. We expect the SNB to try to stabilise the exchange rate at around EUR/CHF 1.00 and we believe that it will not tolerate another drop below the 0.90-area.”
“According to our first estimates, the direct impact on the P&L of the SNB will be as follows: 16.25% x CHF 500 billion = CHF 81.25 billion in losses on the FX portfolio.”
“We assume that the SNB has bought another CHF 10 billion to defend the peg.”
“The SNB also holds gold (around CHF 30 billion), so we expect another CHF 5 billion in gold losses as XAU/CHF dropped by 13 percent. The total losses therefore amount to CHF 86.25 billion, according to our calculations.”
Key Quotes
“Following the discontinuation of the peg, the immediate reaction in the market was a very sharp drop in EUR/CHF with the currency pair trading at 0.85 at some point. However, in the accompanying document the SNB said that it will remain active in the foreign exchange market to influence monetary conditions and we think this is what they did only fifteen minutes after the announcement.”
“In the days after the announcement EUR/CHF stabilised around parity. We expect the SNB to try to stabilise the exchange rate at around EUR/CHF 1.00 and we believe that it will not tolerate another drop below the 0.90-area.”
“According to our first estimates, the direct impact on the P&L of the SNB will be as follows: 16.25% x CHF 500 billion = CHF 81.25 billion in losses on the FX portfolio.”
“We assume that the SNB has bought another CHF 10 billion to defend the peg.”
“The SNB also holds gold (around CHF 30 billion), so we expect another CHF 5 billion in gold losses as XAU/CHF dropped by 13 percent. The total losses therefore amount to CHF 86.25 billion, according to our calculations.”