Swiss central banker Philipp Hildebrand, who completed 15 months of intervention in currency markets this year, may be unable to stop the free registration to extend a rally that he called a "burden."
Options traders are more optimistic about the franc for the next three months all the money in large, except the yen. Bank of Tokyo-Mitsubishi UFJ Ltd. says it can be appreciated by 8.3 per cent to 1.17 per euro in six months after rising more than any other important point since the intervention ended in June. Standard Bank Plc advance estimates of 1.20.
Currency traders say Hildebrand probably not going to renew efforts to stop the profits after the previous sales failed to stem the appreciation which made exports more expensive and saddled the Swiss National Bank with $ 22 billion of losses on exchange currency in the first nine months of 2010. While political leaders said June 21 that the intervention was no longer necessary because the risk of deflation has decreased, the price increases have since declined.
"The negotiating committee can not do much, they are just observers," said Beat Siegenthaler, senior currency strategist at Zurich-based UBS AG, ranked by Euromoney Institutional Investor PLC as the world's second largest currency trader. "Of course we are very concerned. Your options are limited."
The franc advanced 1.2 percent last week to 1.2627 per euro, rising to a record $ 1.2439 on 22 December. It gained 0.7 percent against the dollar to 96.23 cents, extending its origin to 2010 by 7.6 percent. The Swiss currency weakened 0.3 percent against the euro and was little changed against the dollar as of 11:05 am in London today.
Monetary Union
the currency of Switzerland, a refuge in times of economic crisis, has strengthened 17 percent against the euro this year amid concerns about the fiscal crisis involving Greece, Ireland, Portugal and Spain will drag down growth in the region of 16 countries and may force some countries of the monetary union.
The gain of the franc against the euro is an additional "burden" on Swiss exports, which account for about 50 percent of gross domestic product, Hildebrand, 47, told reporters in Zurich on 16 December. The growth of 492 billion U.S. dollars in Swiss economy is likely to be "significantly lower in coming quarters," partly because of the strength of the currency, he said.
The Swiss National Bank said it had started selling the March 12, 2009, his first solo foreign exchange intervention since 1992. The policy, designed to prevent deflation, to protect exports and revive growth, caused the biggest daily fall since 1999 to start the euro. The franc fell 3.4 percent to 1.5299 per euro. In late June 2010, had been strengthened by 16 percent to 1.3184.
SNB losses
The central bank said Nov. 12 that there was a nine-month loss of 8.46 billion francs (8.8 billion U.S. dollars) after depreciation of the euro and the dollar caused its assets to decline in the value of a 21 2 million francs. A year earlier, the bank's 103 years old, reported a profit of 6.89 billion francs.
"The SNB tried to intervene, and that clearly did not work, so they turned away," said Richard Benson, an executive director at London-based Millennium Asset Management, which oversees $ 14 billion of currency funds. The French "continue to strengthen at the same time the stresses and strains in the euro zone will no longer be resolved," he said.
derivative operators are paying a premium of 2.56 percentage points for stock options three months, giving the right to buy the franc against the euro in relation to places that allow sales. That compares with an average premium of about 1 percentage point over the past two years.
Ratings Downgrades
The franc could strengthen to 1.10 per euro next year as the debt crisis in Europe deepens, Lee Hardman, a London-based strategist at Bank of Tokyo-Mitsubishi, wrote in a note to clients on 22 December.
Fitch Ratings downgraded the debt of Portugal with a level of A + on December 23, citing concern for the environment "financing" for the government. Moody's Investors Service said on December 15 can be reduced Aa1 credit rating of Spain and a day after Greece's Ba1 rating placed on review for possible downgrade. Ireland fell five levels by Moody's on 17 December. Switzerland top AAA rating from all three companies.
Analysts forecasts are pessimistic about earnings for the franc. As recently as 30 November was for free until the end of 2010 of 1.33 euro. The currency of trade to 1.30 in late March, an independent study of 34 strategists showed.
Some investors say that the franc is too strong, to the point of reference interest rate 0.75 nationwide below 1, the European Central Bank percent. The two-year notes yielded 48 basis points less than German securities of similar maturity on 23 December, compared with 39 basis points in late September.
Relative Value
The currency is overvalued by 34 percent against the euro, based on the relative costs of tradable goods and services measured by the Organization for Economic Cooperation and Development in Paris.
"The market is getting a little carried away by his concern for European sovereign debt risks," said Jurgen Buscher, Zurich-based head of JB Private Asset Management and former director of foreign exchange at Deutsche Bank Private Wealth Management. The franc may weaken to 1.30 per euro to 1.40 over the next year, he said.
Swiss trade surplus, freeing the country from dependence on foreign capital and may boost purchases in times of crisis, fell to 1.93 billion francs last month from 2.05 billion francs in October, the Federal Office Customs said on 21 December.
While the strong franc helped fuel a 3.4 percent drop in exports last month, the Swiss economy benefits from its proximity to Germany, according to Steven Barrow, chief currency strategist Group 10, Standard Bank in London.
'Saving Grace'
German gross domestic product will grow 3.6 percent this year, more than double the 1.7 percent for the euro region. Switzerland's GDP will rise 2.7 percent, the projections show.
The gain of the coin "is obviously harmful in terms of trade is concerned," said Barrow. "Salvation has been the closest of neighbors trading Switzerland, Northern Europe and Germany in particular have been really strong."
German benchmark DAX stock has risen 18 percent this year, while the Swiss market index has changed little since the end of 2009.
Switzerland's economic growth probably will slow down one percentage point next year to 1.7 percent. That compares with 1.45 percent for the euro area and 2.5 percent in Germany, polls show. Greece and Portugal contract with Spain's GDP increased by 0.6 percent.
Inflation Forecast
Hildebrand's central bank cut the inflation forecast for 2012 of 1 percent on 16 December from 1.2 percent, almost six months after the SNB Vice President Thomas Jordan said the intervention was not necessary because the threat of deflation had largely disappeared. Consumer prices rose 0.2 percent in November from the previous year, compared to a gain of 1.1 percent in May.
Policy makers said in its quarterly report on 24 December that "if a risk of deflation rises, the bargaining committee to take the necessary measures to ensure price stability," repeating a statement from their meeting one week before .
They may have to live with a stronger currency as long as the euro zone remains in crisis, according to Collin Crownover, director of currency management at State Street Global Advisors Inc. in Boston, which manages assets of $ 1,900,000,000,000.
"The problems in the periphery of the euro area will not be resolved, which will continue into next year," said Crownover. "I look back negotiating again. Of course there is always a set of circumstances in which they feel they have to. But in the absence of strong appreciation, most likely going to be on the sidelines. They have very little to intervene .
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