Recent History of the Swiss franc: January to February 2009

Swissy is seeing some slight improvement in afternoon trade, the EUR/CHF cross presently down at 1.4900 from the 1.4990 session high posted earlier. The general flight to perceived safety, with gold fast approaching $1,000, will be playing a part with swissy’s safe haven premium coming into play. However how far can the currency rebound given the ongoing concerns surrounding the widening U.S. tax probe which could weaken Switzerland’s strict privacy rules, damaging the countrys’ wealth management industry and diluting its safe haven status. U.S. tax authorities yesterday said they were still pursuing a civil lawsuit seeking access details of 52,000 UBS clients.

EUR/CHF trades at 1.4897 and is not expected to move much until after the 15:00 options expiry as there is a large option rolling off at 1.4900 at that time. Close to expiry, options are either entirely in the money or out of the money, so both the buyer and the seller of the option have an exposure one minute and no exposure the next. That’s why when expiries are large, prices tend to gravitate toward the strike.

Dealers note talk in London of solid bids on dips to the 1.5000 level today. Several rounds of jawboning from Swiss National Bankers last week and the week prior have dealers lightening up on the Swiss franc as a safe-haven play. A weaker JPY and some modest reflation trades last week also helped weaken the other dollar as well, so all the safe-havens have seen weaker prices in recent sessions.

If my 401K reflates, I for one, am willing to withstand a weaker Swiss franc!

Swiss National Banker Jordan is on the wires saying the Bank has not used up all its ammunition. he sees the risk of a strong downturn, which could be helped by lower rates. He has concerns about the current strengthening of the franc and says that a somewhat weaker franc would be welcome amid the current crisis. His colleague Phillipe Hildebrand has been vocal in advocating currency intervention to weaken the franc.

EUR/CHF is near the top of its intraday range, now at 1.5055.

Ranges so far this morning (06:00GMT – 11.30GMT)

EURUSD 1.2750 – 1.2838, GBPUSD 1.4596 – 1.4768, USDJPY 90.75 – 91.50, AUDUSD 0.6548 – 0.6603, EURCHF 1.4960 – 1.5015, EURGBP 0.8664 – 0.8752.

EURUSD (1.2808) – London initially tested the resiliance of buying ahead of the 1.2700 level with it only managing a low of 1.2749 and has settled into a 1.2780/20 range since its little adventure up to 1.2838. German Industrial Production numbers for December came in worse than expected m/m at -4.6% Vs -2.4% forecast.

EURCHF (1.4995) – Tested lower early on but found good support at the 1.4960 level before trying to make headway above the all important 1.5000 level. Failure to take out this level could see us retest support in the 1.4860/80 region before heading towards 1.5200 and potentially 1.5550, but more on that tomorrow.

GBPUSD (1.4660) – London continued where they left off with the cable taking it up to its highs of the day as EURGBP (0.8735) ran down to 0.8664 after triggering sell orders below 0.8700. The sterling continues to look strong heading into lunch time with a move to 1.5000 still expected.

AUDUSD (0.6595) – The AUD has continued to strengthen against the USD and the JPY throughout the morning session in London but still needs to take out resistance at 0.6600 to take the focus away from a retest of the 0.6300 region. Fundamentally, the outlook for Australia is turning positive with signs of a recovery in commodity prices through the latter part of 2009.

EURCHF is really having trouble taking out the important 1.5000 level which would open the way for a move back to 1.5200. Failure to take out 1.5000 will see us head back to 1.4870 which would be a good buy for the potential move to 1.5200 and possibly 1.5400-1.5500 region.

Early London trade has seen the EURGBP take out the 0.8700 level and heads ever closer to support at 0.8600 which also coincides with the 50 day MA.

The market’s dislike for the EURO continues with most EURO crosses trading on their lows for the day, or close to them. EURJPY 115.90, EURGBP 0.8691, EURCHF 1.4960.

The EUR still seems to be holding ground against the USD with the EURUSD currently at 1.2760. The 1.2700 level is going to be crucial tonight!

The AUDUSD is hanging in there currently just off its daily high (0.6546)  at 0.6526 with the only negative for the AUDUSD being the weaker outlook for the EURUSD.

Earlier today the Swiss finance minister said the government would back the SNB if it wanted to intervene in the forex market to weaken the franc. That must not have been popular at Davos, because now he is saying there is no need for intervention, according to Bloomberg.  EUR/CHF has been trending lower since stocks turned down early this morning. It now trades at 1.4850.

Bloomberg News reports that the Swiss government says it would support the SNB should it decided to sell Swiss francs on the forex market to help exporters.  EUR/CHF has popped to 1.4910 on the headline. The cross has been stuck in a 1.4870/1.4910 range for the last few hours.

This one more piece of the currency puzzle as central bankers and politicians around the world try and beggar thy neighbor.

Swiss FinMin Merz is also quoted as saying he is not too pessimistic on the Swiss economy, forecasting only a 1% decline in GDP this year. More stimulus measures could be considered later this year, he said.

SNB President Roth says he has yet to see an overshooting of the Swiss franc. We should not become nervous, he says, saying we have to monitor the situation now. Interest rates in Switzerland will remain low for a relatively long period. Swiss franc appreciation has bee painful for exporters so the SNB is watching carefully. We are always ready for any situation, he concludes, via Bloomberg.

Sounds like lots of watchful waiting from the SNB. Just don’t push too far.

EUR/CHF trades at 1.4980, up from 1.4932 lows after the poor US housing data.