The Swiss National Bank would realize a loss of 31 bln. francs, if it accepted a EUR/CHF exchange rate of 1.10 instead 1.20 and if we assume that the Swissie also appreciates against the dollar and other currencies at this 8.6% ratio (EUR/CHF 1.10 vs. 1.204 since Q1/2012).
The second assumption is strong and not aimed for the short term, because the dollar is currently appreciating. However, like many we think that the dollar will go down again.
The SNB’s equity would reduce from 60 bln. last quarter to 28.5 bln.
This assumption implies that every one of the 8 million Swiss inhabitants loses 150 francs (160 US$) per week, paying this amount as subsidies to the Swiss export industry. Each Swiss currently owns 16’552 Euros (51% of the SNB FX reserves) and is forced to buy 700 Euros and 900 francs in other currencies (especially dollar, pound and yen) every week via the SNB, if he/she wants or not. In this game each Swiss has lost already nearly 4000 francs since last year, while the export industry has increased its profits and doubled the Swiss trade surplus to 2.5 bln. in May. A study of the Zurich university (KOF) has proven that Swiss exporters are not very sensitive to exchange rates thanks to high-quality products.
Markets would probably price the Euro at parity with the franc, which means that the SNB equity would be already gone and each Swiss had lost 8000 francs.Previous post See more for Next post
Tags: Exporters,franc,Japanese yen,Reserves,Swiss National Bank