Intervention Tactics Of The SNB (Swiss National Bank)

I'm starting to be fascinated by these intervention tactics of SNB. It's like macho trader moving the market. I read the SNB traders lift all the offers at multiple banks both on electronic "exchange" and OTC. They obviously want to tell people to back of.

Made me think of other interventions. Seems the SNB see themselves as BOJ did 2003/04. I also read that Hong Kong MA had success fighting hedge funds betting against it.

But then there's the big loser. The BOE against Soros.

So, have the cracks at SNB got a handle on the world and european economy and will they prove correct in timing these interventions. If they really are spending lots to keep rates where they want them I can imagine more and more voulchers will be attracted. Aren't they also fighting the Fed printing press and the ECB quant measures? How can they win?

Maybe they aren't using sterilised intervention. Sterilized foreign exchange interventions tend to be less effective at moving exchange rates than unsterilized interventions. Sterilized intervention requires the central bank to follow the intervention, such as buying euro assets with CHF-denominated currency, with a countervailing sale of CHF assets to mop up the extra CHF that that would otherwise be injected into the economy.

For unsterilised action see Japan 2003: "Nevertheless, the media have characterized the recent interventions as "unsterilized" because the Japanese money supply has steadily increased along with the intensive intervention activity. The Nikkei Financial Daily recently noted that the total value of interventions from the beginning of the year until the end of August matched almost exactly the increase in the BOJ's current account balance over that period, suggesting that the BOJ left the funds associated with its intervention activity in the market. " (http://www.frbsf.org/publications/economics/letter/2003/el2003-36.html)

I guess they also have advantage of knowing how big positions against CHF are and acting accordingly. Sustained intervention means one or more of these four things to me

1. intervention is unsterilised or
2. speculators are still like me "Holding On" and SNB wants to squeeze or
3. they're trying to get EURCHF as far away from 1.5000 possible and start a new "trend" which technical analysts etc jump on.
4. they're bluffing

Really really glad I learnt my lesson from Tuesday and am not betting the house on it! Would feel queasy otherwise :D. The way my position is now (200k) - I can take the heat for a while longer.

Your thoughts welcome! Interesting how it can even put on pressure on EURUSD. But that is what I think is least sustainable. The SNB seem to be pretty sure the US is going to start outpeforming EUR area soon?





















Update 20:38CET:
"The Hong Kong Monetary Authority intervened during the New York trading session Thursday, selling HK$2.713 billion, to maintain the USD/HKD trading band under its currency board system, according to data released by the HKMA. "

So everyone is trying to defend against the mighty printing machine. I wonder how good a idea that is.... But I guess it's signal to US to get their act together.