Tuesday, May 29, 2012

Has The Swiss National Bank Restarted The Printing Press? (EUR/CHF)

From ZeroHedge:
Huge rise in Currency Reserves: The SNB has restarted the printing press
The game for the Swiss National Bank seems to have changed completely. Again the central bank had increase money supply, as measured by deposits at the SNB by local banks and by the Swiss confederation, this time even by 13219 mil. francs (source). This money printing implies that the SNB had to buy in Euros in similar quantities in order maintain the floor.

Already last week the central bank had to shift its strategy from selling Euros to buying Euros. The SNB managed to reduce money by 35446 mil. (i.e. sell mostly euros) between Sep 9, 2011 and May 11, 2012. In the last two week it had to increase money supply by nearly 17000 mil. CHF, loosing nearly 50% of all "gains" in the previous money supply reduction.

We have speculated that the SNB will double or triple the Forex reserves before it gives in and the floor will break.

At the current speed of 13 bln per week, this will result in 676 bln. CHF per year, i.e. they will have tripled money supply and currency reserves in one year. This sum exceeds slightly the Swiss GDP, implying that a break of the floor from 1.20 to 1.10 (about 10%) on the basis of 50% Euros in the SNB reserves would result in a loss of around 5% of GDP at the central bank. Moreover, in the week ending in May 25th, nothing really extraordinary happened, what would happen in case of a Greek euro exit?...MORE