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SNB prints nearly 5 billion francs in one week, FX traders poised to get ripped off

 

As we expected in our post “What’s this crazy movement in EUR/CHF ? SNB Floor Hike ?“, long-time investors, global macro funds and US investment banks are moving into gold and the Swiss franc again.  The SNB had to buy euros and print new Swiss francs of around 5 billion francs last week, as today’s monetary data show. Given that the EUR/CHF was around 1.21, the SNB FX purchases were more expensive than previously.

There are still some FX traders who are convinced that the SNB will hike the floor to 1.22. Hence, currently both the SNB and these traders are short CHF. However, in order to balance the total trades, there must be some big accounts who are buying CHF.

We do not believe that the current movement is caused by the SNB itself, they would do an official announcement. An announcement would be much cheaper for the central bank because many FX traders would trade on behalf of the SNB and long-term investors would not pile into CHF as much as they currently do.

Moreover,  a new floor would destroy some of the SNB credibility and the risks of huge losses would increase.

The EUR/CHF is trading around 1.21, exactly between floor and rumor.

 

These are today’s and the latest SNB money supply numbers in terms of total deposits:

September 7: 370’673 million francs

August 31: 365’976 million francs

August 24: 362’112 million francs

 

The explanation of the data

 

  This link to the SNB website gives insight how many francs the Swiss National Bank requested commercial banks to deposit during the last week. This is just a technical accounting process: Minus (or liability) for the SNB, Plus (or asset) for the banks. Therefore it is often called “printing” like adding a zero to a currency exchange rate. The SNB uses this “printed” money to buy more currency reserves. At the same time it increase reserves of the banks at the central bank allowing them to give more loans to consumers and home builders  via the money multiplier.An example for the monetary data is shown here:

 

SNB Sight Deposits May 25

SNB Sight Deposits June 1st


 

Read the full details about  money printing differences between SNB, ECB and Fed in our article “The big Swiss Faustian Bargain” also appeared on Zerohedge.

 


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George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on SeekingAlpha.com and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.
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Permanent link to this article: https://snbchf.com/2012/09/september7-snb-prints/

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