The Swiss National Bank has made it clear to the FX market that it has set more than a metaphorical line in the sand when it says it doesn’t want EUR/CHF to drop below 1.50. On Wednesday, it came wading in as the rate neared this level and sent it sharply higher to just under 1.5400. Intervention is often spoken of as futile, but that clearly isn’t always true.
In comment Commerzbank points out: “The successful action should have increased the SNB’s credibility in the market. Besides EUR/CHF, the SNB also intervened in USD/CHF, with obvious side-effects on EUR/USD. While the total amount of CHF selling by the SNB is unclear, volumes were presumably larger than at the last round of action on June 18, given that this time the spot rate initially jumped by more than 2.5 big figures compared to a 1.38 big figure move two weeks ago. Following yesterday’s move, market participants will have become more cautious in playing the downside in EUR/CHF, and the lower end of the recent trading range is unlikely to be re-tested any time soon.”
Apparently the Bank for International Settlements was also seen selling CHF on EBS.