Category Archives: Currencies

Volatility in the aftermath of the SNB decision to lift FX floor on EURCHF

The following two charts illustrate the increased volatility that can be observed since the SNB decision was taken to cancel the floor on EURCHF. Even though the two charts are intraday charts of January 27th 2015. Chart 2 shows that after 9am CET the FX rate is suddenly extremely volatile. At the same the chart 1 shows that the SMI moved up as the CHF strengthend and then also weakened when the EURCHF reversed.

Today the EURCHF FX rate may also have been influenced by the decision of UBS to inform all their institutional clients, that they will have to pay interest on their balances in CHF. Paying banks to look after money. Interesting times!

Here a comment from Rabobanks senior currency strategist:

EUR/CHF – desperately seeking traction
EUR/CHF has traded as high as the 1.0380 area this morning, the firmest level since January 15 which was the day the SNB stepped away from the EUR/CHF1.20 floor. The respite for the CHF coincides with comments from SNB vice president Danthine who reiterates that the SNB is willing to intervene in the market to offset CHF strength. These comments are well timed and may have exaggerated the move higher in EUR/CHF this morning. For the most part, however, the move higher in EUR/CHF appears to be a reaction to short-covering in the EUR ahead of this week’s FOMC. […]

[…] If the SNB are intervening in the market, it would achieve greatest ‘bang for its buck’ by accentuating an existing trend. A less hawkish Fed this week and an adjustment higher in the EUR/USD would potentially allow the SNB a little more traction in moving the EUR/CHF cross rate higher. That said, the SNB would be battling against a very dovish ECB. We see the potential for EUR/CHF to stabilise in the 1.02 area on a 3 mth view, but concede that the outlook for EUR/CHF is still very fluid.


Chart 1: SMI intraday 09.00-12.00 CETequity-volatility

Chart 2: FX intraday 00.00-12.00 CETfx-volatility



Update: January 29th

Here some more graphs of the EURCHF FX rate. Three interesting points in time. This looks like planned intervention. The 9am to 11am time window is often very volatile. If I remember correctly the EURCHF acted in a similar way back wen SNB was intervening around 1.50. It happened in jolts and will affect players on margin. Long term unleveraged players less prone to intervention – or may even be attracted to take other side…

EURCHF-SNB-Intervention-2015-2 EURCHF-SNB-Intervention-2015

SNB successfully front-running ECB Printing Press

Luckily the SNB has given up the EURCHF exchange rate of 1.20.

Many market participants believe they had to preempt the next wave of speculation (pressure on swiss franc) that would have occured with the impending ECB decision to buy government bonds in the former ‘PIGS’. Also see this comment on reuters: It came a week before the European Central Bank is expected to unveil a massive bond-buying program that might have forced the SNB to intervene repeatedly to defend the cap.

Also as Barclays noted: The SNB decision was taken a week before the ECB policy decision and one day after the European Court of Justice’s opinion on the ECB’s OMT, paving the way for the ECB to announce sovereign QE at next week’s GC meeting. 

It can be interesting to look back in several months, years and see which stocks were most heavily traded, biggest losers on a historic day like today. That’s why I attach the following three screenshots to this post:

swiss-central-bank-move-jan-15th-2015 swiss-central-bank-move-jan-15th-2015_2 swiss-central-bank-move-jan-15th-2015_3

Closing prices:

swiss-central-bank-move-jan-15th-2015_4 swiss-central-bank-move-jan-15th-2015_5


Screenshots all from Swissquote website. Fair usage; educational purposes.

EURCHF FX – Price Level vs Volume Level – Heat Map Chart


Think this chart is great. It was presented by Dewet Moser, Alternate Member of the Governing Board of the SNB today at the SNB Apéro 2014. I swapped the captions from German to English.

Very interesting to see how the heat map has turned cold with just short bursts of volume and price action two times in last 18 months.

Such heat maps are useful in gaging investor psychology and key technical levels, which I understand to be levels at which lots of volume or high volatility occured, floors or tops were set.

I disagree that these levels marked in dark red aren’t relevant, as the efficient market gang often invokes.


Emerging Markets: Brasil and Turkey 10-Year Yield 2007-2014, 2013-2014 and 2010-2014


The above chart is from the brilliant website, with text and boxes added by me.

The list of countries with fragile economies certainly isn’t getting any shorter as of late. But the charts below shows that the yield on the 10-year brasilian and turkish gov bond have been at elevated levels for over 6 months. The difference with regard to euro periphery countries which also had elevated yield levels during the height of the crisis: they didn’t last as long, and there was an ECB to intervene.


graph source: F.A.Z., Bloomberg

Here’s another chart of Turkey;



Thomas Jordan: Statements Regarding Monetary Policy Autonomy / Minimum Rate (EURCHF) Contradicting?

Reading Thomas Jordans (of the Swiss National Bank) speech he held yesterday in Zürich (Zürcher Volkswirtschaftliche Gesellschaft) I came across something which could be termed as a contradiction in his statements:

“Der Mindestkurs schränkt unsere geldpolitische Au-tonomie nicht ein, wie dies vereinzelt fälschlicherweise behauptet wird, sondern ist Ausdruck der gelebten geldpolitischen Autonomie. Der Mindestkurs stellt keine Annäherung und schon gar keine Anbindung an den Euro dar.”

The (EURCHF) minimum rate doesn’t restrict our monetary policy autonomy, as is often wrongly suggested, but is an expression of lived monetary policy autonomy. The minimum rate doesn’t reprsent an approximation and especially not a binding to the Euro.

He then goes on to say that a few pages further (p 9/12)

Am Hypothekar- und Immobilienmarkt entwickeln sich Ungleichgewichte, die ein Risiko für die Finanzstabilität bilden. Diesem Risiko könnte grundsätzlich durch höhe-re Zinsen begegnet werden. Doch lässt das übergeordnete geldpolitische Ziel der Preisstabili-tät auf absehbare Zeit keinerlei Zinserhöhungen zu.

Imbalances are developing in the mortgage and property market, which pose a risk for financial stability. These risks could in principle be met with higher interest rates. But the overarching objective of monetary policy – price stability – doesn’t permit any interest rate hikes in the forseeable future.

which I find sounds like a contradiction. It’s is clearly limiting the monetary policy option of increasing interest rates and the cause is even given as price stability (which of course is linked to the real exchange rate / the minimum rate in place).

Reminds me of the impossible trinity aka the trilemma of monetary policy autonomy, fixed exchange rates and free capital movement being mutually exclusive where a central bank can only pursue two of the above mentioned three policies simultaneously. Seems that that is exactly what is happening in Switzerland.

Lombard Odier Outlook 2014 Presentation

Today I participated in a presentation at the Bellevue, Berne (a beautiful venue) organsied by the first class Swiss Private Bank Lombard Odier. I won’t go into the actual outlook they gave but more into what participants views were.

During one of the presentations participants (mostly HNWI, company or state & diplomatic representatives) were given the possibility to vote on different questions (with a credit card sized device each participant found on their seat).

One of the votes was regarding the outlook for QE ending 2014. Of the roughly 80 participants a total of 77% didn’t believe the central banks will be able to end QE this year. 43% do however believe that the US will end QE (ECB and BOJ continuing), while 34% believe that the US will continue with a QE4. Only 23% believe worldwide QE will end 2014.

Another vote was regarding what rate of world economic growth we’ll see 2014. Only 4% believe we’ll see a average historic growth rate (‘normal’ growth) this year. On the topic of will there be a slowdown leading to recession 14% voted yes. The vast majority (82%) believe economic growth will be positive, but below the historic rates.

The last question was regarding the SNB policy and more specifically the EURCHF FX rate. 72% believe that 2014 will see that rate hovering around 1.23 in a year. 9% believe in a rate of 1.35-1.40, 12% in a new and higher 1.30 SNB implemented level while 7% believe the EURCHF will tend back towards 1.00.

The senior strategists’ presentation was made very interesting by this direct fast response tool that shows the voting results in a slide of the presentation being held. First class bank, as I said.

Swiss National Bank (SNB) Top 100 US Equity Holdings = 12.4bn USD (Top 2400 = 24bn USD, Worldwide holdings USD 89bn?)

In the middle of this post is a list of the top investments by size on the books of the Swiss National Bank according to SEC filings. If we assume the SNB is using the MSCI weightings as of Dec 30th, 2013

MSCI World Weightings 2013

as a benchmark for their worldwide equity investments, 54% would be invested in the US. Further we could then assume that SNB holds USD 4bn in the UK equity market (9.11%), slightly less than USD 4bn in Japan (8.7%) and about USD 2bn in France (4.16%). In total the SNB holdings in equities would therefor be around USD 45bn. (In this presentation Samuel Streit of the SNB presented a graph on page 10 that 5-10% of the USD 460bn FX/Currency reserves risks are in equities which would be in line with the ball park calculation I arrived at above)

However there’s a problem with the above approach; if you take a look at this datathis data

from the SNB website on asset allocation, you’ll see that the foreign currency investments in the USD are only 27%, the EUR area on the other hand 48%. So if we recalculate the USD 25bn we know are invested in the US based on the weightings of the currency investments (above), the total equity portfolio would stand at USD 89bn, which is probably 3% points too high if 16% equity holdings mentioned in the SNB data is correct. Then again a 5% move in the developed world equity markets would put us there today!

Anyone wondering why stocks didn’t tank in a phase of worldwide QE should have an eye opening moment when they see the size of these holdings. You’ll surely understand that other central banks are no strangers to playing in the equity markets either. Central bank action explains a strong bid in the market. They don’t teach you that when they’re stuffing EMH (efficient market hypothesis) down your neck at Uni.

How to read the list: Exxon holding was worth 505m USD, Apple 484m USD, etc as of Oct 2013 – don’t get misled by the ‘.’ before the three zeroes…To calulate what the current value is of the Top 100 just look at S&P 500 performance (excluding banks) since late October 2013, then multiply with USD 12.4bn.

If you’re wondering which US equities you should put in your portfolio, along with the weightings on the right hand side – this list is probably an excellent starting point! If it’s good enough for the Swiss National Bank, after all.

EXXON MOBIL CORP 30231G102 505’145.000 4.08%
APPLE INC 37833100 484’581.000 3.91%
JOHNSON & JOHNSON 478160104 368’901.000 2.98%
MICROSOFT CORP 594918104 329’132.000 2.66%
CHEVRON CORP NEW 166764100 299’950.000 2.42%
PROCTER & GAMBLE CO 742718109 295’322.000 2.38%
AT&T INC 00206R102 276’628.000 2.23%
INTERNATIONAL BUSINESS MACHS 459200101 272’062.000 2.19%
GENERAL ELECTRIC CO 369604103 268’355.000 2.16%
GOOGLE INC 38259P508 258’559.000 2.09%
VERIZONMUNICATIONS INC 92343V104 236’870.000 1.91%
PFIZER INC 717081103 216’266.000 1.74%
PEPSICO INC 713448108 209’928.000 1.69%
COCA COLA CO 191216100 208’271.000 1.68%
MCDONALDS CORP 580135101 205’211.000 1.66%
SUNCOR ENERGY INC NEW 867224107 176’730.000 1.43%
WAL-MART STORES INC 931142103 166’504.000 1.34%
MERCK & CO INC NEW 58933Y105 161’407.000 1.30%
BRISTOL MYERS SQUIBB CO 110122108 160’238.000 1.29%
PHILIP MORRIS INTL INC 718172109 153’362.000 1.24%
AUTOMATIC DATA PROCESSING IN 53015103 147’111.000 1.19%
CANADIAN NATL RY CO 136375102 140’432.000 1.13%
GENERAL MLS INC 370334104 137’014.000 1.11%
ORACLE CORP 68389X105 136’794.000 1.10%
CISCO SYS INC 17275R102 135’545.000 1.09%
GOLDCORP INC NEW 380956409 132’090.000 1.07%
SCHLUMBERGER LTD 806857108 128’314.000 1.04%
QUALCOMM INC 747525103 127’759.000 1.03%
INTEL CORP 458140100 123’383.000 1.00%
AMAZON INC 23135106 123’287.000 0.99%
SOUTHERN CO 842587107 122’759.000 0.99%
TRANSCANADA CORP 89353D107 121’428.000 0.98%
HOME DEPOT INC 437076102 119’988.000 0.97%
DISNEY WALT CO 254687106 119’482.000 0.96%
KIMBERLY CLARK CORP 494368103 118’579.000 0.96%
VISA INC 92826C839 116’451.000 0.94%
LILLY ELI & CO 532457108 115’666.000 0.93%
CANADIAN NAT RES LTD 136385101 111’753.000 0.90%
COLGATE PALMOLIVE CO 194162103 105’718.000 0.85%
VALEANT PHARMACEUTICALS INTL 91911K102 105’454.000 0.85%
ENBRIDGE INC 29250N105 105’237.000 0.85%
COMCAST CORP NEW 20030N101 104’120.000 0.84%
SPECTRA ENERGY CORP 847560109 104’002.000 0.84%
GILEAD SCIENCES INC 375558103 103’801.000 0.84%
UNITED TECHNOLOGIES CORP 913017109 103’067.000 0.83%
ABBOTT LABS 2824100 101’462.000 0.82%
DUKE ENERGY CORP NEW 26441C204 101’432.000 0.82%
DOMINION RES INC VA NEW 25746U109 99’703.000 0.80%
MANULIFE FINL CORP 56501R106 98’236.000 0.79%
ALTRIA GROUP INC 02209S103 97’186.000 0.78%
NEWMONT MINING CORP 651639106 96’977.000 0.78%
TJX COS INC NEW 872540109 93’634.000 0.76%
CONSOLIDATED EDISON INC 209115104 93’086.000 0.75%
PAYCHEX INC 704326107 92’381.000 0.75%
CONOCOPHILLIPS 20825C104 92’374.000 0.75%
BOEING CO 97023105 91’708.000 0.74%
AMGEN INC 31162100 90’919.000 0.73%
FACEBOOK INC 30303M102 90’432.000 0.73%
MASTERCARD INC 57636Q104 88’842.000 0.72%
POTASH CORP SASK INC 73755L107 88’231.000 0.71%
3M CO 88579Y101 84’794.000 0.68%
UNITED PARCEL SERVICE INC 911312106 83’309.000 0.67%
OCCIDENTAL PETE CORP DEL 674599105 81’608.000 0.66%
UNION PAC CORP 907818108 79’206.000 0.64%
UNITEDHEALTH GROUP INC 91324P102 79’095.000 0.64%
BARRICK GOLD CORP 67901108 78’466.000 0.63%
ABBVIE INC 00287Y109 76’713.000 0.62%
CVS CAREMARK CORPORATION 126650100 76’250.000 0.62%
ANNALY CAP MGMT INC 35710409 76’144.000 0.61%
BCE INC 05534B760 75’950.000 0.61%
AMERICAN INTL GROUP INC 26874784 73’857.000 0.60%
CENOVUS ENERGY INC 15135U109 73’327.000 0.59%
MONDELEZ INTL INC 609207105 71’826.000 0.58%
EBAY INC 278642103 70’568.000 0.57%
BECTON DICKINSON & CO 75887109 70’334.000 0.57%
CANADIAN PAC RY LTD 13645T100 69’970.000 0.56%
CELGENE CORP 151020104 69’530.000 0.56%
TARGET CORP 87612E106 68’101.000 0.55%
BROOKFIELD ASSET MGMT INC CL A LTD VT 112585104 67’582.000 0.55%
HONEYWELL INTL INC 438516106 67’210.000 0.54%
FORD MTR CO DEL 345370860 66’998.000 0.54%
TIME WARNER INC 887317303 66’429.000 0.54%
AUTOZONE INC 53332102 65’983.000 0.53%
VERISK ANALYTICS INC 92345Y106 63’845.000 0.52%
MAGNA INTL INC 559222401 62’651.000 0.51%
SUN LIFE FINL INC 866796105 62’445.000 0.50%
STARBUCKS CORP 855244109 62’413.000 0.50%
AMERICAN CAPITAL AGENCY CORP 02503X105 62’106.000 0.50%
BIOGEN IDEC INC 09062X103 61’899.000 0.50%
FRANCO NEVADA CORP 351858105 61’459.000 0.50%
MONSANTO CO NEW 61166W101 61’439.000 0.50%
SEADRILL LIMITED G7945E105 59’764.000 0.48%
CATERPILLAR INC DEL 149123101 59’377.000 0.48%
MEDTRONIC INC 585055106 58’587.000 0.47%
DU PONT E I DE NEMOURS & CO 263534109 58’372.000 0.47%
E M C CORP MASS 268648102 58’149.000 0.47%
YAMANA GOLD INC 98462Y100 58’017.000 0.47%
REYNOLDS AMERICAN INC 761713106 57’855.000 0.47%
AMERICAN TOWER CORP NEW 03027X100 57’771.000 0.47%
PG&E CORP 69331C108 57’305.000 0.46%
12’395’963.000 100.00%

This chart plotting Nasdaq to Money Supply also interesting (from


By the way, the SNB made a large bet against the worldwide equity indices by not being invested in financials (apart from VISA and a few others, they’re basically massively underweight), as can be seen from this graph showing the weightings of the sectors in the MSCI and comparting the Top 100 list with a Top 100 US equity list by market cap.





SNB FX Holdings in EUR Including & Excluding Derivatives

From data published by the SNB I compiled the following charts, which show how the EUR holdings as a percentage of total FX reserves have seen massive fluctuations. Also interesting to note how the holdings including and excluding derivatives diverged substantially from mid/end 2011 to mid 2012.


Light Blue (above): Currency breakdown of foreign currency investments, excluding foreign exchange derivatives (quarterly)

Dark Blue (above): Currency breakdown of foreign currency investments, including derivatives, excluding investments and liabilities in connection with foreign exchange swaps (quarterly)