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Snap: Huge Spike In Swissie Following Continued Disintervention By Swiss Bank

Tyler Durden's picture




 

With everyone anticipating the SNB to intervene and keep the CHF lower, the orderbook got for too onesided once again. So after days of the currency increasing without any intervention, and way too many EURCHR longs getting pummeled by margin calls, we just saw an unprecedented move higher in the CHF: precisely what the SNB hates to see. This is an isolated move, not seen in any other asset class, likely indicating some major FX fund just got wiped out on its EURCHF losses. Note the magnitude and sharpness of the move. And a much scarier question: is the SNB now buying CHF in an attempt to undo all its prior interventions, knowing full well we are approaching game over time, now that suddenly everyone is practicing bizarro economics and trying to strengthen their currencies?

 

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Wed, 06/23/2010 - 12:10 | 429026 Pamela Anderson
Pamela Anderson's picture

Thank you Zero Hedge... CNBC should learn one or two... or +00 things from this site!  Thanks and keep the good work!

Wed, 06/23/2010 - 12:14 | 429043 cbaba
cbaba's picture

what ?

you must be kidding, their interest is different than we, people, they serve for the wall street.

they are working for Fed GS and other Financial terorists.

 

 

Wed, 06/23/2010 - 12:10 | 429027 Debtless
Debtless's picture

Quite magnitudy and sharp indeed.

These banksters should be rounded up and shot.

Wed, 06/23/2010 - 12:12 | 429038 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

magnitudy-fruity!

Wed, 06/23/2010 - 12:10 | 429028 newstreet
newstreet's picture

This is where we buy, right?

Wed, 06/23/2010 - 12:11 | 429031 MsCreant
MsCreant's picture

Ahhhhhhh! [Thump] [Boing]

[Splatt?]

Wed, 06/23/2010 - 12:12 | 429032 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

I propose the term 'syringe pattern' if no one has suggested it already...

Wed, 06/23/2010 - 12:12 | 429036 Turd Ferguson
Turd Ferguson's picture

PPT taking an early lunch?

Wed, 06/23/2010 - 12:13 | 429040 10044
10044's picture

US and England are thru

Wed, 06/23/2010 - 12:13 | 429042 scratch_and_sniff
scratch_and_sniff's picture

Brutal.

Wed, 06/23/2010 - 12:17 | 429049 BumpSkool
BumpSkool's picture

...what't the big surprise? We go right back where we've always been... strong CHF. It was the attempt to track the Euro that was the problem! Now history will reassert itself. (minus the US Dollar this time..)

Wed, 06/23/2010 - 12:19 | 429053 BPOP
BPOP's picture

no, its china buying it. as previously discussed by bpop.

Wed, 06/23/2010 - 12:41 | 429132 Lux Fiat
Lux Fiat's picture

CHF has often been thought of as a safe haven.  However, thought I saw some articles a while back indicating that either some major Swiss or Austrian banks (or both) had significant exposure/lending to eastern European countries in CHF.  The rising CHF wreaks havoc on the borrowers and  balance sheets of the lenders in these external loans.  I was wondering if this was one of the main reasons the Swiss were trying so hard to keep the franc down.

 

P.S.  China's (and other SWFs') attempts to diversify out of USD into Euros worked out so well.  This move may be similarly ill-timed.

Wed, 06/23/2010 - 12:51 | 429187 Renfield
Renfield's picture

"Switzerland is affected by Eastern Europe's affection with low interest rates: many Eastern Europeans financed their homes with Swiss franc mortgages; as the currencies in Eastern Europe have plunged, there has been a scramble to obtain Swiss francs. This challenge is not limited to Switzerland (Japan, Sweden and the euro zone face the same challenge), but the Swiss have been particularly proactive in providing temporary credit facilities to Eastern Europe. This, too, may come back to haunt Switzerland, but is perceived the lesser of the evils as it helps prop up Swiss banks (most affected are Austrian banks as they not only extended loans, but were leaders in buying Eastern European banks)."

- Axel Merk, 10 March 2009, http://www.marketoracle.co.uk/Article9352.html

"I mentioned last week that European banks are at significant risk. I want to follow up on that point, as it is very important. Eastern Europe has borrowed an estimated $1.7 trillion, primarily from Western European banks. And much of Eastern Europe is already in a deep recession bordering on depression. A great deal of that $1.7 trillion is at risk, especially the portion that is in Swiss francs. It is a story that could easily be as big as the US subprime problem.

In Poland, as an example, 60% of mortgages are in Swiss francs. When times are good and currencies are stable, it is nice to have a low-interest Swiss mortgage. And as a requirement for joining the euro currency union, Poland has been required to keep its currency stable against the euro. This gave borrowers comfort that they could borrow at low interest in francs or euros, rather than at much higher local rates.

But in an echo of teaser-rate subprimes here in the US, there is a problem. Along came the synchronized global recession and large Polish current-account trade deficits, which were three times those of the US in terms of GDP, just to give us some perspective. Of course, if you are not a reserve currency this is going to bring some pressure to bear. And it did. The Polish zloty has basically dropped in half compared to the Swiss franc. That means if you are a mortgage holder, your house payment just doubled. That same story is repeated all over the Baltics and Eastern Europe.

Austrian banks have lent $289 billion (230 billion euros) to Eastern Europe. That is 70% of Austrian GDP. Much of it is in Swiss francs they borrowed from Swiss banks. Even a 10% impairment (highly optimistic) would bankrupt the Austrian financial system, says the Austrian finance minister, Joseph Proll. In the US we speak of banks that are too big to be allowed to fail. But the reality is that we could nationalize them if we needed to do so. (And for the record, I favor nationalization and swift privatization. We cannot afford a repeat of Japan's zombie banks.)

The problem is that in Europe there are many banks that are simply too big to save. The size of the banks in terms of the GDP of the country in which they are domiciled is all out of proportion. For my American readers, it would be as if the bank bailout package were in excess of $14 trillion (give or take a few trillion). In essence, there are small countries which have very large banks (relatively speaking) that have gone outside their own borders to make loans and have done so at levels of leverage which are far in excess of the most leveraged US banks. The ability of the "host" countries to nationalize their banks is simply not there. They are going to have to have help from larger countries. But as we will see below, that help is problematical.

Western European banks have been very aggressive in lending to emerging market countries worldwide. Almost 75% of an estimated $4.9 trillion of loans outstanding are to countries that are in deep recessions. Plus, according to the IMF, they are 50% more leveraged than US banks."

- John Mauldin, 21 February 2009, http://www.marketoracle.co.uk/Article9018.html

Wed, 06/23/2010 - 13:18 | 429279 A Man without Q...
A Man without Qualities's picture

This is the thing, people imagine that putting money into a Swiss Bank means they buy gold and bury it in a safe under the Alps.  Truth is, the leverage it up and lend to a bunch of dodgy property developers (probably looking to diversify out of cigarette smuggling and pimping) no doubt with a local bank acting as the front.  If this thing collapses, the Swiss will blow all the bridges and tunnels into the country and tell all foreign investors that the money has gone, or repay you by handing you the loan contracts.  Putting gold into a Swiss safety deposit box is no doubt a safe haven trade, depositing cash (whatever currency) with UBS is not.

 

Wed, 06/23/2010 - 13:22 | 429293 Renfield
Renfield's picture

For my next report, I look at how much Swiss gold got sold off from the reserves so SNB could buy EUR...

(You think I'm only kidding?) :-)

Wed, 06/23/2010 - 14:16 | 429505 Canucklehead
Canucklehead's picture

The pressure in Poland is being relieved because they sell mainly to Germany, who are doing well with the lower euro.  Germany increases exports and that benefits the Poles, who in turn increase exports to Germany.  The increased economic activity helps the Poles pay their mortgages.  The hot-euro is flooding into Switzerland and sitting in hot-money accounts. This in turn helps the Swiss banks stabilize their end of the bargain.

Everyone is happy so long as the hot-money stays.

What was Soros saying again?

Wed, 06/23/2010 - 12:22 | 429060 TWORIVER
TWORIVER's picture

Can we assume that was their best shot and should see the USD/CHF rally from here?

Wed, 06/23/2010 - 12:23 | 429069 buzzsaw99
buzzsaw99's picture

Note to Eurotrash: DEBAUCH YOUR CURRENCY!! OBEY TURBO TIMMY! I COMMAND YOU IN THE NAME OF LARRY SUMMERS!

Wed, 06/23/2010 - 12:41 | 429139 Turd Ferguson
Turd Ferguson's picture

CNBS: "Only 90 minutes until rate decision"

Like there's some kind of drama...

Wed, 06/23/2010 - 13:06 | 429244 Clayton Bigsby
Clayton Bigsby's picture

are they doing that same dumb-ass countdown thing with the ticker on the screen?  they are such silly little ass-whores - if only MCC didn't have such fan-fucking-tastic tits - then I could turn away - but I CAN'T!!!  DAMN YOU MICHELLE CARUSO CABRERAS TIIIIITTTTTSSSSS!!!!!!

Wed, 06/23/2010 - 12:48 | 429167 Rusty_Shackleford
Rusty_Shackleford's picture

Zoinks!

Wed, 06/23/2010 - 13:01 | 429227 jkruffin
jkruffin's picture

People working on Wall Street should be embarrassed to even show their faces in public as much corruption and manipulation you see in our markets.  It is quite embarrassing how they turn a market positive on horrible news.  This market should be near 10k or lower by now under normal trading events.

Wed, 06/23/2010 - 14:20 | 429526 Canucklehead
Canucklehead's picture

Not really.  Take a look at the Dow activity in around the May 27th to June 4th, 1940 time period.

Today, things look okay.

Wed, 06/23/2010 - 13:15 | 429270 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Clean out the dumb money. Shank the longs followed by shanking the shorts in a few days. The SNB ends up with the bag or more like the Swiss taxpayers.

Wed, 06/23/2010 - 13:16 | 429275 jbc77
jbc77's picture

Looks like someone is busy cranking the euro. I mean with all the good news today why shouldn't the market close green......

Wed, 06/23/2010 - 13:20 | 429280 Renfield
Renfield's picture

hehehe

This is just the warmup Crank.

After gold opex we get Crank part 1.

Then the Crank the Sequel after FOMC.

It was almost a thing of beauty, watching how they contained the Bad News selloff, minute by minute, candle by candle. I covet their patience.

This is soooo much better than telly. You get to find out 'market reaction' right away...

Wed, 06/23/2010 - 13:39 | 429289 London Dude Trader
London Dude Trader's picture

I wouldn't put too much emphasis on this move. While large and sharp, it was in line with similar moves in EURCHF in recent days. The truth is that there's very little participation in the markets today (as has been the case since the World Cup began last week)  because of the England and USA football matches running concurrently between 15:00 and 17:00 BST. Additionally it's a sweltering day in London, NYC, and Chicago. 

Wed, 06/23/2010 - 13:41 | 429387 Lux Fiat
Lux Fiat's picture

Additionally it's a sweltering day in London, NYC, and Chicago.

???  Hahahahahh....If you want sweltering, come to Texas.  90s or 100 degrees with low humidity is not bad.  But not only are temps higher than your three fair cities, but the humidity is higher than NYC and London.  On the plus side, things are uncharacteristically lush and green for this time of year.

 

Wed, 06/23/2010 - 13:30 | 429327 godfader
godfader's picture

Wow a 40 pip move! Whenever one of these happens one hedge fund blows up. Why? Because these rather insignificant intraday <1 sigma moves can't possibly just happen without anyone blowing up can they?

Wed, 06/23/2010 - 14:29 | 429539 Renfield
Renfield's picture

Cripes. What's going on with USDJPY...I thought FOMC and equities were saying everything was hunky-dory. USDJPY just fell past the magic 90 handle now. PPT is on it but someone's trying to unload a buncha USD.

Wed, 06/23/2010 - 14:54 | 429663 Lux Fiat
Lux Fiat's picture

Thought that one of the ways to goose the US equities markets was "to unload a buncha USD".  Doesn't look like nervous longs are buying it, or perhaps it's another gift to the better connected to get out at "better" prices without tanking the market just yet.  I'm such the optimist. 

But then, the power of the printing press has overcome many a negative "fundamental" time and time again over the past 15 months.  However, the political climate doesn't look like it favors ramping it up right now.   Strong deflationary fundaments vs. CB printing presses.  Personally, Deflate looks to have a lead on Press, but it's not over till either Press throws a few cogs and belts, or Deflate gets run through the rollers and has Benjamins printed on his flattened body.  Till then, I'm enjoying the rollercoaster as best I can.

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