RBC: SNB Inaction on Swiss Franc A Matter of Fear
March 24, 2010 at 11:12 UTC || By Forex Playmaker
RBC Capital Markets posits an interesting theory as to why the Swiss National Bank remains inactive despite the franc’s meteoric rise of late against the euro:
The Swiss National Bank’s unwillingness to curb the franc’s advance may indicate policy makers are concerned it will be labeled a currency manipulator by the U.S., according to RBC Capital Markets.
The franc has strengthened 2.5 percent against the euro in the past two weeks even after the SNB repeated it will act to contain any “excessive” gains in its currency.
“The SNB, despite jawboning, is nowhere to be seen,” Sue Trinh, a senior currency strategist at RBC in Hong Kong, wrote in a report today. “It is possible the SNB has let the franc go because Switzerland is more at risk of being named a manipulator than China in the April 15, 2010, report on international exchange-rate policy.”
While it was speculated that the SNB would relax its intervention efforts, one would still have expected them to intervene in the face of excessive CHF gains. Of course, intervention efforts typically fail to reverse an appreciating currency, but can often times decelerate that appreciation. Perhaps the SNB has come to the conclusion that the risk of being labeled a currency manipulator is not worth the reward of slowing the franc’s appreciation.
Full Article: Swiss Franc’s Gains May Show SNB Fears Manipulator Tag, RBC Says
