SNB Intervenes To Lower "Massively Overvalued" Franc, Leaves Gold As Only "Safe Haven" Currency

Tyler Durden's picture

There is that famous line from the movie Die Hard: "You ask me for miracles, I give you the FBI." Well, to all the gold bulls out there, "I give you the SNB." The Swiss central bank "unexpectedly" intervened to curb the record appreciation of the Swiss Franc which is having Swiss exporters seeing black and blue, by saying it would cut rates and by increasing the supply of francs to money markets. Specifically it lowered its target 3 month Libor to "as close to zero as possible" from 0.25%. The central bank also expanded banks' sight deposits to 80 billion Swiss Francs from 30 billion and said it will repurchase outstanding SNB bills. So while it did not directly go ahead and buy dollars it made it all too clear the SNB's appreciation days are over. Which leaves those seeing a non-fiat based refuge from all the insanity in Europe (which is currently raging at unseen before levels, and as a result the EU announced it would issue a statement on the situation in the markets this afternoon - expect nothing but more lies and BS) and the rest of the world, with just one option. Gold.

Here is Goldman with more perspective on this intervention:

In reaction to the sharp appreciation of the CHF over the past couple of weeks, the SNB announced a rate cut this morning, reducing its 3-month CHF Libor target to 0.00-0.25%, from 0.00-0.75% previously. Given that the SNB was targeting 0.25% within the old range - and 3-month rates were actually below that target – this change in target should be seen mostly as symbolic. However, it also shows that the risks to the monetary policy outlook have shifted significantly and our rate forecast is under review. 


The SNB also announced that it would increase the supply of liquidity to banks by raising banks’ sight deposits at the SNB from around CHF30bn to CHF80bn. The idea behind this measure seems to be that, by increasing the liquidity available to banks, some of that liquidity will flow into Euro-denominated assets, thereby reducing the pressure on the CHF. Put differently, the SNB is aiming at the exchange rate channel in this latest ‘quantitative easing’ exercise.

The SNB will also “keep a close watch on developments on the foreign exchange market and will take further measures against the strength of the Swiss franc if necessary.” Direct foreign exchange interventions would be the obvious next step the SNB could take. While the experience with the latest round of interventions was mixed at best, the recent CHF appreciation has apparently been strong enough to make the SNB consider resorting to such a step again if the increase in liquidity does not show results. 


The resilience of Swiss exports in the face of the large appreciation of the CHF (+8.5% in trade-weighted terms over the last four weeks) has been remarkable (see chart below). But it is only a matter of time before Swiss exports will correct more meaningfully if the exchange rate remains around these levels.

Elsewhere Barclays thinks that this intervention will be more successful than the bank's horrendous meddling in the markets which ended up costing it billions in losses. Via Bloomberg All News: The "SNB may be more effective this time in weakening the Swiss franc compared to back in 2010", Paul Robinson, strategist at Barclays, writes in note. The EUR/CHF is “significantly undervalued” compared to 2010 by ~32% on PPP basis and 28% on BEER model; this makes intervention more likely to succeed. The CHF’s relative value to other safe-haven assets matters and since April 2010, CHF has gained 10% vs JPY, 26% vs USD. SNB will be highly aware of mkt view that it had failed in its 2010 intervention to weaken the CHF; this means SNB “will not back down quickly” if intervention doesn’t weaken CHF; intervention may be large and sustained this round to ensure credibility. Recommend sell CHF vs other “safe currencies or assets”, like yen and gold.

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Cassandra Syndrome's picture

Currency Intervention Bitchez

Cash_is_Trash's picture

My printer's faster than yours.

Overflow-admin's picture



"(My cock is much bigger than yours,
My cock can walk right through the door)
With a feeling so pure..
It's got you screaming back for more.

Cool, in denial
We're the cruel regulators smoking
Cool, in denial
We're the cruel regulators smoking


System of a Down

Debtless's picture

Race to the bottom. Everybody loses. Run for your lives. 

prophet's picture

Well, now meet me in the bottom,

Bring me my runnin shoes.

Well, now meet me in the bottom,

Bring me my runnin shoes.

When I jump out the window,

I won't have time to loose.

When you see me streakin by,

Please, don't be late.

When you see me streakin by,

Please, don't be late.

Well, when you see me movin,

You know my life is at stake.

Well, I hope you see me,

I come streakin by.

Well, I hope you'll see me when,

I come streakin by.

She got a bad old man,

You know, I'm too young to die.

Boy, I got to leave here.

Fore I get caught in there.


Howlin' Wolf - Meet Me In The Bottom

Snidley Whipsnae's picture

John Lee Hooker's version is the best... imo

Ratscam's picture

Dealer Broadcast 03 Aug 2011 at 10:32:30 (GMT) Futures Margin Update: With effect on 8 Aug 2011 @ 2:00PM CET, the Initial and Maintenance margin for Swiss Franc Future (SF) will increase by 11% to USD 3,375 and USD 2,500 respectively. Marginanhebung bei Schweizer Franken Future SF um 11% ab 8. August 14:00 CET. Saxo Bank (Switzerland)

doomandbloom's picture

OT, but expect new Laws around the internet

..and look how quickly they jump to the conclusion that it was China...

Kingbingo's picture

Yeah, but probably was China though. If you open negotiations with a Chinese firm on Monday your server is hacked by Thursday, it can’t keep being a coincidence. 

Dr. Engali's picture

I was really hoping for a gold pull back to purchase more,but it looks like the governments around the world have all gone completely mad.

Cash_is_Trash's picture

have all gone completely mad

Doc, they've been going mad since abandoning the gold standard.

Kingbingo's picture

They should have just  printed the money and bought gold with it instead. Would have had the same effect of keeping a lid on currency appreciation and they would get free gold as well. 



Ghordius's picture

Nice avatar, Kingbingo! I was thinking the same since quite a while...

I presume they are still ashamed that they sold so much of the SNB gold - well, they had a LOT of international pressure to do so...

ConfederateH's picture

If the Swiss sheeple realize that not only has Hildebrand lost another CHF10B last quarter, but that he practically gave 50% of the countries gold to the $IMFS, then they will probably... eat more fondue.

The real issue is Bernanke, Geitner and Lagarde.  They are ready to swat any little country that threatens the reserve currency exorbitant privilege.  If the Swiss thought the IRS shakedown of CS and UBS was bad, wait until treasury and justice start seizing random Swiss accounts.

DonutBoy's picture

I agree with you, and I wonder why Japan isn't doing the same.  What's the point of jawboning?  Why not secure assets for your country?

mynhair's picture

The BEER model?  I'll drink to that!

Midwest Prepper's picture

Merely Transitory....

Pretorian's picture

This is game changer If ECB joins the party then they have muscule to kill the "parasite"gang, I  wrote previously that with Swiss SNB intervention in FX market this morning. 300 pips in few hours eur/chf. Swiss bank is floading market with CHF to libor. If Trichet joins the party in supporting the Euro than Goldman Sach and his cousins will have to start covering their SHORT on all assets vs CHF and by midnight margin call if Ben doesnt not support the existence of Putin "parasite economy". I think ECB got the tips how  to kill the wolfs.

slaughterer's picture

Will not be long until futures margins will be raised on Gold, now that the margins have been increased for SF.  On another note, not a single word on this site about the leap in MBS Composite from -5% to 7.1%?  And not a single note of caution about the massaged ADP number about to come out in 1 hour?   Things that make you go hmm... 

Tyler Durden's picture

Why? Because someone out there pays their mortgage, and is thus incentivized to refinance? Have you actually seen Bank of America's balance sheet which is the result of virtually nobody paying their mortgage any more?

As for ADP.... god, that was funny.

Snidley Whipsnae's picture

From Jesse's Cafe Americain "ADP Jobs tomorrow, but its a flaky indicator"

Great site

weinerdog43's picture

Couldn't agree more.  Jesse (and Yves Smith) is very, very good.

ConfederateH's picture

Yves, like Jesse, is blinded by liberalism and just as twisted by their hate for tax cuts as Obama, Reid and Bruce Krasting.

Id fight Gandhi's picture

Maybe theyll raise the ES margins...nah, they never do that.

They did do me a favor with silver hikes though.

Adp has never predicted the nfp which really matters, yet they hype it every freaking month.

Any blip from a good adp will be flushed with the nfp

Version 7's picture

Yuppie ki yay mother f*ckers..

Josephine29's picture

Not everybody is optimistic over the long term effect of this move by the Swiss National Bank.From the Notayesmanseconomics blog

Will this work?

In the short-term quite possibly as the rise of the Swiss Franc was getting very extended and the SNB may be able to claim a tactical victory. As time goes by though I am much more doubtful. The real world is rather different to theories and text books as for example there has been a high demand for the Swiss Franc and the SNB may end up simply supplying it! Indeed as the supply of Swiss Francs is limited as she has a small economy compared to the amount of “hot money” in the world in some respects it could make it look more attractive to the bigger players..

youngman's picture

Now wouldn´t it be funny if the Swiss Frank somehow buy pun entended...becomes the new world reserve printing SNB..keep printing...

DosZap's picture

Makes no  sense to this dummy, why would you print more fiat (which we all know devalues ANY fiat), and then, think that would serve as a catalyst to making the Hot Money buy more of it?.................

We have enough devauled fiat crap already,why would you want to invest in an increased supply of something worth less?

The Swiss economy, and size, cannot hope to maintian it's pedestal status like this, as you say, it's Transitory.

The real world is rather different to theories and text books as for example there has been a high demand for the Swiss Franc and the SNB may end up simply supplying it!

Zero Debt's picture


If all the market cared about was rates, they would have gone for the Indian Rupee a long long time ago.

hungarianboy's picture

bla bla blaaaaaa. It's the Euro that is weak so this can be still ugyly for the swiss.

Still believe that sub parity is where it is going.

Ratscam's picture

SNB's president, the brilliant Philipe Hildebrand has lost 30 billion Swissies in just under 18 months to no effect. He will fail this time as well. in 3 weeks we're back to all time highs to EUR&USD. CHF 30 billion is 4'000 chifs per capita or about 50% of the UBS bailout in 2009. UBS and CS have ballooned their balance sheet to rouhly 500% of GDP. Talking about fat tail risk. Let's have Reggie take a look at it.

Negative interest rates would have done more to curtail the appreciation. However, the Swiss or rather international mantra is:

"Though shall not harm the bankers" 

Snidley Whipsnae's picture

Hey, they gotta sell those coo coo clocks to somebody...

Ratscam's picture

uuups in only lastet a couple of hours.

Who cares, what is a billion Swissies these days.

chump666's picture

ha a print job via the SNB. 

SamuelMaverick's picture

Harry Browne would be angry about this if he was alive to see this nonsense going on. 

chump666's picture

yeah its a fail, 0.25% and the CHF was still bid, now at zero the same.  the EUR is looking extremely ill.  see if the GBP will be bid against the CHF.  

Snidley Whipsnae's picture

As pointed out here and elsewhere, the Swiss Pols are considering an issuance of 'gold backed Swiss Franks' to circulate with the current paper version.

Of course anyone familiar with Gresham's Law knows what will happen if two currencies compete... the weak will be spent and the strong will be hoarded... or, to simplify, bad money drives out good...

Ratscam's picture

they already have it

however the "Goldvreneli" are not used for everyday purchase of items, we do use credit cards in CH as well. The coins are collector items.

But yes you are right SNB is preparing new bank bills for 2012.

Now that's food for thought for the conspiracy bugs out there.

zuuuueri's picture

the new banknotes are nothing surprising or new. SNB has a habit of changing the designs every so often. They had a contest back in 2010 for the new design. 


Ratscam's picture

who won? the design with the chocolate and cheese on it or the other one with the RIP UBS and CS 2012?

technovelist's picture

I have a few of those, as I think they are pretty. They don't have much premium considering that they are fairly small, or at least they didn't when I bought them some time ago.

Lone Mad Minute Medic's picture

It's my fault people. About three weeks ago I traded in a few thousand FRN for Swiss Francs. TPTB must have gotten spooked and rolled the game up and changed the rules. Seems like they keep looking up and seeing my ugly ass in the room and bounce me out. But like the Honey Badger, I don't give a shit. I'm going to keep my helmit on and keep crashing the hive.

BlackholeDivestment's picture

...September sure looks like a good time to take a vacation from the city.


JSD's picture

This actually IS transitory.  SNB has lost many billions on this 'trade', and will apparently lose many billions more as the short-term dip will allow a nice re-entry point for anyone with half a brain to either put on a new postion, or add to an existing one.  If anyone enjoys 'found money'; enjoy.  Thanks again SNB!  

janus's picture

seen it.

Come on, mr durden, i'm itchin for some more movie/music recommendations (have done Fight Club (5 stars)...then read the book -- bettah -- and then saw marathon man (4 stars)) and so you give me die hard as a follow up?

For example: needing an allusion, you could just as easily have referenced joe buck in midnight cowboy, wherein he shoves the receiver into the old man's mouth -- in need of some kind of fix, and in a general funk with the whole whoring thing.  hell, maybe not, at first blush it seemed to illustrate the futility of fiat fairly doesn't matter.  The point is, it's not so much the prescience of the metaphor that counts, it's the cinematic quality of the reference.

ps, the implications of the article are hella-crazy...the SNB will have a tough time sprinting barefoot through that glass-shard strewn breezeway...and it's sloppy hell on the other side.

smoke em if you got em,


magpie's picture

I always knew the Swiss had a slight touch of Mediterranean.

Come party again with the Latin Monetary Union, Little Swiss Miss dances to the Brussels Lira.

swissaustrian's picture

Hi, we are the swiss.

We are now re-entering the currency devaluation contest we left last may. We don´t have as much experience in moneyprinting as some of you do.

Would you please help us a little bit?

Is it a good start to wipe out the equity of our central bank by buying doomed currencies and selling half of our gold?

How about lowering rates to zero whilst having a booming domestic real estate market?