Exactly when the US had a relatively good Markit Flash PMI, rumors are sent out that deposits in CHF for foreigners should be taxed. To send out this rumor together with good US data seems to be intentional.
Traders should remember that the SNB has circulated the “negative interest” for CHF deposits rumor already for decades. Swiss banks will be strongly opposed to such a measure. Due to the strong integration of financial markets, CHF deposits held outside of Switzerland could not be controlled. A big loss for Swiss banks !
The Swiss economist Hans Kaufmann said:
“The money market for Swiss franc has long been a presence abroad, where the SNB and the Federal Council have no control. The negative interest rates in 1979 have not brought the hoped-for success. Foreign-issued CHF accounts were not subject to negative interest rates. CHF bonds issued by Swiss organizations and corporates were already in 1979 exempted from the negative interest tax. This cannot be changed today even less likely, because it violates recent Swiss tax agreements (‘European withholding tax directive, double taxation agreement with the US’). On changes on the tax status these bonds would mature (‘i.e. could be put’) immediately.” (translation of here with some explanations in single quotes).
Some think tanks report that the SNB is considering other measures, but you should remember that Swiss exporters are currently relatively happy with the USD/CHF at 0.96 compared with a USD/CHF of 0.71 in August 2011, given that about 40% of Swiss exports are dependent on the dollar and dollar-correlated currencies like the CNY, the GBP and the JPY (source). Still one should add the effects of the interest rate/inflation parity (2.7% US versus -1% Swiss inflation), an effect which makes Swiss production cheaper over the time.
If the SNB is concerned about the recent inflows into the franc, this does not mean that they will lift the floor. The SNB simply does neither want to lower the floor, nor to continue spending lots of money on euro buying !
In other words: Buy the US dollar and sell the euro, but leave us alone ! We are happy with the EUR/CHF peg !
To our minds, you should trade with the SNB traders, who will intervene soon and sell the EUR/CHF and happy to get rid of some euros of their heavily overloaded balance sheet. Hence the SNB was just begging the small forex trader for some pips.
Comment three hours later (16.33 GMT): The EUR/CHF spiked at 1.2076 today,currently to 1.2024, and will probably fall back to the peg level of 1.2010 later, when SNB traders are picking even last single pip of any lost Long EUR/CHF traderPrevious post See more for Next post
Tags: Capital Controls,Deposits,Exporters,floor,franc,negative interest,negative interest rate,peg,PMI,Swiss National Bank,Switzerland,Tax,withholding tax