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Swiss National Bank instigates permanent intervention in EUR/CHF to curb Swiss franc strength

Written by Sam Coxhead on September 7th, 2011.      0 comments

10:15 AM (NZT) As if the debt crisis in Europe was not contributing enough volatility, overnight the Swiss National Bank (SNB) announcement a permanent intervention at 1.2000 on the EUR/CHF cross to curb the staggering CHF strength that threatens to starve economic growth and create deflation in the Swiss economy.
The CHF dropped around 10% across the board as the EUR/CHF rate leapt from 1.1050 to 1.2050 immediately. This will place the Japanese authorities in an interesting situation with their efforts to curb strength in the YEN. After initial volatility and massive risk on boosts, the markets settled down to pre intervention levels, obviously with the exception of the CHF. In the table below the 24hr highs denoted with the * were immediately after the SNB announced their move.
The full ramifications are hard to ascertain immediately, but my view is that we will see a little resurgence in the US dollar as a result of this move. The market will also be wary of any Japanese moves, but these seem unlikely with fresh leadership at the helm.  The Scandinavian currencies looks to be the next “safe haven” prospects, in particular the Norwegian Krone NOK. The AUD and NZD may also be seen as prospects overtime, but the current softness of the global outlook will p5robably prohibit this in the near term.
In the US the ISM Services(non manufacturing) PMI was much better than expected being 53.6 vs expected 51.0. This has done little to help the equity markets as risk aversion remains high.
    Last 24 hours trade
  Current level Low High
NZD/USD 0.8237 0.8202 .8388*
AUD/USD 1.0485 1.0478 1.0627*
NZD/AUD 0.7855 0.7804 0.7904
AUD/NZD 1.2731 1.2652 1.2814
NZD/GBP 0.5168 0.5135 0.5185
NZD/EUR 0.5885 0.5862 0.5913
NZD/YEN 63.98 63.45 64.51*
NZD/CAD 0.8160 0.8140 0.8210