Swiss Franc Hits All Time High Against Dollar After SNB Books Profit From UBS Bad Bank, Warns On Inflation

Tyler Durden's picture

And the parade of dollar negative news continues this morning. First the USDCNY an 18 year low, now the USDCHF hit an all time low, trading as low as 0.8675. This is astounding considering the pair had traded north of parity for pretty much all time until last summer when the USD succumbed to Bernanke's strong dollar policy. The reason for the record surge is attributed to comments by SNB president Philipp Hildebrand who, in observing the economy, says that the "inflation outlook still in range of price stability and Swiss economy grows more vigorously than anticipated." Translation: record CHF has killed off all our exports, and Nutella is about to picket our offices. And in other related, and very entertaining news the SNB said that posted a first-quarter profit of 1.9 billion Swiss francs ($2.18 billion), thanks to gains from currency transactions and a fund in which it parked toxic assets from banking giant UBS. In other words, SNB has now become AIG, booking MTM profits on its literally toxic subprime assets (thank you Brian Sack and Chicago permabid IWR algos), all the while ignoring the 220 billion in USD backing the "asset" side of its balance sheet, which if fairly marked would likely bankrupt the central bank overnight. And people say we can't teach the euros a thing or two about banking...

From Reuters:

The positive result could take some pressure off SNB Chairman Philipp Hildebrand, who has come under fire for huge losses the central bank incurred previously due to forex interventions intended to cap the rampant Swiss franc.

"In the first quarter of 2011, the Swiss franc depreciated against the European currencies, leading to exchange rate gains, especially on euro holdings," the central bank said in a statement on Friday.

Hildebrand will face shareholders at the SNB's annual general meeting in Berne later on Friday for the first time since the central bank racked up a 2010 loss of 19.2 billion francs, its largest ever.

In the first quarter of this year the SNB also recorded a profit on the fund with toxic assets bought from UBS during the financial crisis and said its loan to the Stabilisation Fund was further reduced to 9.9 billion francs from 11.8 billion francs.

The SNB set up the fund at the height of the crisis, buying assets from UBS for some $39 billion. The fund posted a quarterly profit of $678 million and contributed 338 million francs to the consolidated result, the SNB said.

And for those lamenting the sad passage of the rag known as the dollar first in Chinese and now in Swiss terms (we hope readers did all their Bahnhoffstrasse Patek Phillipe shopping last year) we present its obituary, translated into Swissish.