Forex Flash: If EUR & JPY are driven by commentary then CHF has a different story – BBH

Share | (Barcelona) - Brown Brothers Harriman analysts believe that if the Yen and Euro moves have been driven by comments pointing in a direction contrary to short-term market positioning, the Swiss franc's story is different.

They note that speculation has centred on the risk that the SNB may still resort to negative rates or raise the euro floor. In their opinion, neither scenario seems particularly likely at this juncture as they feel that there is no compelling reason to change tactics.

The SNB did not appear to have to intervene in December and the market has done some heavy lifting for it. In less than 5 sessions, the Euro has rallied 2.7% against the franc, lifting it through last year's highs to above CHF1.24. The benefit of changing the Euro floor to CHF1.25 from CHF1.20 does not seem worth the risks and costs.

The team suspect that Franc bears will likely turn more cautious as the CHF 1.25 area is approached in any event. They finish by writing, "There are some ideas that the SNB will look for an opportunity to unwind some of its foreign currency holdings. We are suspicious of its ability to do so secretly and hence do not expect it either. Moreover, we would expect it not to be triggered until the risk of deflation has subsided."

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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