BUZZ- COMMENT-Switzerland's central bank has set EUR/USD free


June 30 (Reuters) - For more than a decade the massive FX intervention conducted by Switzerland's National Bank has suppressed volatility, helping to contain EUR/USD in tighter ranges. That policy has ended now, and with it EUR/USD is free to move. It is prudent to expect bigger movement and greater volatility.

When the SNB intervenes it supports EUR/CHF underpinning EUR/USD too. When reserves are subsequently rebalanced with over 60% of the euros purchased sold and 39% converted to dollars it weighs EUR/USD.

This has a top and tailing effect with EUR/USD supported at the outset and subsequently weighed, and because of the great size of SNB operations which saw reserves top 1 trillion Swiss francs, the SNB's made a big impression on EUR/USD curtailing volatility and almost certainly suppressed speculation.

The intensification of intervention and doubling of the FX reserves after the 1.2000 EUR/CHF peg was abandoned amplified the SNB's influence on EUR/USD with volatility sinking to a record low.

Freed of the SNB and losing the enormous liquidity it provided EUR/USD can move more, and traders who have grown used to years of relative inactivity should anticipate greater movement.

For more click on FXBUZ

EURUSD, vol, EURCHF and SNB reserves

(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)


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


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