SNB's Hilderbrand Pledges To Act Against Strong Swiss Franc

As we expected yesterday, when we pointed out that the CHF has hit a 10 year high against the euro, the Swiss National Bank confirmed that it was likely one step away from curbing "excessive appreciation" of its currency. SNB president Phillip Hildebrand said that “we can’t fully rule out deflation threats in the case of
renewed external shocks,” Hildebrand, who took over the helm of
the SNB in January, said at an event in St. Gallen, Switzerland,
today. “An excessive appreciation of the franc against the euro
would for example be such a shock.” Well, the appreciation can't really go much higher, as "the franc appreciated for an eighth day today and was 0.2
percent stronger at 1.4323 per euro as of 12:40 p.m. in Zurich.
It reached 1.4309 yesterday, the highest since the euro’s debut
in 1999." In the meantime, those buying straddles on the CHF is multiplying, with the expectation of repeating a little piece of Soros history.

More from Bloomberg:

Hildebrand’s comments come as the franc’s 3.5 percent surge
against the euro this year puts pressure on the central bank to
show it’s still committed to a yearlong policy of keeping a lid
on the currency. The franc has been partly boosted as the crisis
over deficits and debt in Greece, Portugal and Spain boosts
demand for the currency as a refuge.

“By repeating the standard line that the SNB will continue
to counter excessive gains, he has implied that the current
level is acceptable,” said Elsa Lignos, a foreign-exchange
strategist at Royal Bank of Canada Europe Ltd. in London. “He
could have gone further and said they are concerned about
current” euro-franc levels.

Hildebrand, making his first public speech since taking the
helm of the central bank, said that the SNB has a “broad
arsenal” to counter any excessive gains in the franc if needed.

“The instruments are clear,” he said. “We’re purchasing
foreign currencies and we’re able to do that to a very large
extent to counter any excessive appreciation.”

In the meantime, UBS is taking the other side of the Goldman strong-EUR trade (which still has to formally be stopped out at a sub $1.35 close), andhas revised its target for the CHF against higher from 1.45 to 1.40.

UBS AG, the world’s second-largest currency trader, said
today it expects the franc to appreciate to 1.40 per euro in
three months compared with a previous forecast of 1.45. Any
“sharp and sudden” moves in the Swiss currency could still
prompt the SNB to act, the Zurich-based bank said.

Once again, as always, bottom - meet racing currencies. The failed Keynesian experiment will not end until you are broken.

Comments

[Alexandra Hamilton]

UBS also raised it's growth forecast for 2010 to 2 - 2.5%.

http://www.ubs.com/1/e/media_overview/media_switzerland/releases.html?ne...

Nothing to worry about then.

[Roy Bush]

UBS bastards...I wouldn't trust a word that band of criminals put out.  They hung 265 people out to dry to get sued by the IRS so they could get bailout money from the US Feds.

[ED]

Competitive currency debasement = passing the deflation-buck?

[Oquities]

speaking of currency manipulation,

1.US wants yuan revalued up, pressures them

2.China warns US to cool it or else

3.US needs non-monetary warning shot across China's currency bow

4.Google pulls out (promises made?)

5.yuan spikes (see chart on Clusterstock)

[[e-mail]]

Below 1.43, not a strong pledge...

[mark456]

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