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Forex Flash: Higher EUR/CHF implies source of AUD demand drying up - Westpac

By FXstreet.com,  January 14, 2013, 10:44:00 PM EDT

FXstreet.com (Barcelona) - As Westpac FX strategist Sean Callow notes, "improved Eurozone financial stability continues to generate outflows from the safe haven CHF then the SNB will not be accumulating new FX reserves and thus a source of AUD demand would dry up (reallocation within reserves is of course always possible)."

On the flip side, "the unwind of long CHF positions indicates a substantial shift towards risk assets, in a clear vote of confidence for the ECB and Eurozone more generally. EUR and higher yielding Eurozone bonds are the main winners if the EUR/CHF rally is sustained but the ripples extend far beyond Zurich" Mr. Callow adds.

In order to put readers into context, as Sean explains, "SNB's diversification away from some of the euros it buys when it intervenes was the source of much discussion last year, including of course at the RBA where Governor Stevens expressed his surprise at the new Swiss demand for AUD..."




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.


This article appears in: Investing, Forex and Currencies

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