Today's Major Market Move - Swiss Franc Strengthens 14% vs the Dollar This Year

Even though the equity markets appear to be nonplussed about the whole debt ceiling drama, there are some signs of people taking cover with their money. Gold and Silver have been rising recently. Gold is an age old safe haven and more recently Silver seems to be assuming that role as well (margin rate hikes by the CME notwithstanding). In forex-land, the Paraguay Guarani which was discussed in this post and for reasons yet to be determined by this blog, seems to also have become a financial bomb-shelter. Then there is of course the Swiss Franc, which is on par with Gold in terms of its historical safe haven reputation. Due to all the turmoil in Europe and now in the US, the USDCHF (US dollar / Swiss Franc cross) is down 14% this year. The following is a chart of both the USDCHF and USDEUR in terms of % gains.


Click on the image for a larger view.Click here for the current version of the chart.

One group of people that is not particularly happy with this trend are the members of the Swiss National Bank, although they appeared to have learned from back in 2009/2010 that resistance (i.e. intervention) is futile. This article from fxstreet.com provides some good commentary on the strengthening of the Franc and the dilemma it poses for the Swiss authorities. Here's a snippet:

For a period from March 2009 through March 2010 the Swiss National Bank tried to turn back the tide of CHF/EUR. Their unilateral intervention, though massive, did little to help. The CHF gained on the European unit regardless of the amount of EURs that the SNB bought. Because of the intervention the SNB foreign currency reserves rose from Sfr45 billion at the end of 2007 to Sfr125 billion by the end of March 2010, the wrong time for that trade. They were, as it turns out, the only size buyer of EUR and seller of CHF and because of that the central bank lost Sfr21 billion in 2010.

Also mentioned in that article is how Swiss equities have not reacted well to the strengthening currency (which makes their exports pricier). Here's a chart of the % gains of 4 Swiss equity indexes which are down between 6 and 11% this year.


Click on the image for a larger view.Click here for the current version of the chart.