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SNB intervenes for 6.3 billion francs in one week, total 10bn Brexit intervention

Interventions:
The SNB intervenes for 6.3 bn francs in the week ending last Friday, the week one after Brexit. Already on Day One , the SNB intervened for an estimated 3-4 bn francs

This is once again the a new weekly high since the end of the EUR/CHF peg in January 2015. Seven billion sight deposits come from Swiss banks, when fearful investors moved their money on Swiss bank accounts.

FX: Unexpectedly for us, the SNB raised the intervention level to 1.0850. Apparently the central bank converted GBP->CHF flows into GBP->EUR flows – via EUR/CHF purchases.

Speculators: are long CHF 10K contracts against USD versus 6.3K contracts last week. (CFTC data)

Intervention levels are too high, in particular on dollar purchases

The SNB converts a certain percentage of the inflows into USD to keep up the USD share at around 33%. Dollar purchases at 0.97 CHF are far too expensive in a historical (e.g. 0.75-0.80 CHF in 2011) and future perspective (when global inflation comes back). Similar to the EUR purchases at 1.40 in 2010, dollar purchases at elevated levels of 0.97 can pave the way for a SNB bankruptcy.

 

Date of data (+ link to source) avg. EUR/CHF during period avg. EUR/USD during period Events Net Speculative CFTC Position CHF against USD Delta sight deposits if >0 then SNB intervention Total Sight Deposits Sight Deposits @SNB from Swiss banks “Other Sight Deposits” @SNB (other than Swiss banks)
01 July, 2016 1.0865 1.1228 Brexit: SNB intervenes for 6.3  bln. CHF +10867x125K +6.3 bn  per week 507.5 bn 430.3 bn 77.2 bn
24 June, 2016 1.0854 1.1272 Brexit: SNB Intervenes for 4.9 bln. +6381x125K +4.9 bn per week 501.2 bn 423.5 bn 77.8 bn
17 June, 2016 1.0834 1.1252 Speculators and sight deposits switch to long CHF vs. USD +7130x125K +2.6 bn  per week 496.3 bn 416.5 bn 79.8 bn
10 June, 2016 1.0936 1.1335 Speculators short CHF, when USD/CHF was fallen by 3%. -9645x125K -0.3 bn per week 493.7 bn 415.5 bn 78.1 bn

 

SNB balance sheet now over 100% of GDP

It should be remarked that the SNB assets are volatile FX investments.

FX investments are less than 3% of the BoJ, ECB, Fed and BoE balance sheet.

Central banks from Emerging Markets typically buy foreign bonds. But these countries have far higher inflation and therefore – over time – a weaker local  currency.

But the Swiss Franc is a currency that by tendency appreciates.

SNB Balance Sheet 2016

full background on sight deposits here.

 

 

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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