Tuesday, September 06, 2011

Following SNB announcement, expect the Euro to stabilise today and to strengthen from Thursday or Friday

As I expected (and mentioned in my Twitter and Blog over the last several days), the Swiss National Bank (SNB) has now announced that it is prepared to buy "foreign currencies" (read dollars and euros) in “unlimited quantities“ as “the current massive overvaluation of the Swiss franc poses an acute threat to the Swiss economy and carries the risk" of deflation.

This efffectively sets a ceiling to the franc’s strength and aims "for a substantial and sustained weakening of the Swiss franc”.

Whether the SNB's interventions will be effective remains to be seen - but, I expect, that combined with the marginal effect in stabilising the euro and strengthening of the dollar (the latter was going to happen anyway, even without support from the SNB, but will now happen the more effectively).

Briefly, expect the Swiss Franc to stabilise and perhaps weaken a bit; and expect SNB intervention to help stabilise the euro and strengthen the dollar. Sphere: Related Content

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