Nik/EUR / USD
Сложи две вертикални графики една до друга на usd/bgn r i usd/chf и сам прецени !
УСПЕХ!Switzerland
Economic Overview
Switzerland is the 19th largest economy in the world, with GDP valued at over US$240Bln in 2001. The economy is relatively small, but it is one of the wealthiest in the world on a GDP per capita basis. The confidentiality offered by the Swiss banking system, coupled with the country's lengthy history of political neutrality has created a "safe haven" reputation for the country and its currency. As a result, Switzerland is the world's largest destination for offshore capital. The country holds over US$2Trl in offshore assets and is estimated to attract over 35% of the world's private wealth management business. This has created a large and highly advanced banking and insurance industry that employs over 50% of the population and comprises over 70% of total GDP. Since Switzerland's financial industry thrives on its safe haven status and renowned confidentiality, capital flows tend to drive the economy during times of global risk aversion, while trade flows drive the economy during a risk-seeking environment. Therefore trade flows are important, with nearly two thirds of all trade conducted with Europe.
Monetary & Fiscal Policy Makers
The Swiss National Bank (SNB) is the monetary policy authority of Switzerland. All decisions are based on a consensus vote. The Board reviews monetary policy at least once a quarter, but decisions on monetary policy can be made and announced at any point in time. Unlike most other central banks, the SNB does not set one official interest rate target, but instead sets a target range for their three month Swiss Libor rate. The Swiss Libor rate is set based upon the need for maintaining an inflation target of less than 2% inflation per year.
The SNB also closely monitors exchange rates, as excessive strength in the Swiss franc can cause inflationary conditions. This is especially true in environments of global risk aversion, as capital flows into Switzerland increases significantly during those times. As a result, the SNB typically favors a weak franc, and is not hesitant to use intervention as liquidity tool. SNB officials intervene in the franc using a variety of methods including verbal remarks on liquidity, money supply and the currency.
The most commonly used tools by the SNB to implement monetary policy include the following:
Target Interest Rate Range: The SNB implements monetary policy by setting a target range for their three-month interest rate (the Swiss Libor rate). This range typically has a 100 basis point spread, and is revised at least once every quarter. This rate is used as their target because it is the most important money market rate for Swiss franc investments. Changes to this target are accompanied with a clear explanation in regards to the changes in the economic environment.
Open Market Operations: Repo transactions are the SNB's major monetary policy instrument. A repo transaction involves a cash taker (borrower) selling securities to a cash provider (lender), while agreeing to repurchase the securities of the same type and quantity at a later date. This structure is similar to a secured loan, whereby the cash taker must pay the cash provider interest. These repo transactions tend to have very short maturities ranging from one day to a few weeks. The SNB uses these repo transactions to manipulate undesirable moves in the three month Libor rate. To prevent increases in the three month Libor rate above the SNB's target, the bank would supply the commercial banks with additional liquidity through repo transactions at lower repo rates, and in essence create additional liquidity. Conversely, the SNB can reduce liquidity or induce increases in the three month Libor rate by increasing repo rates.
The SNB publishes a Quarterly Bulletin with a detailed assessment of the current state of the economy and a review of monetary policy. A Monthly Bulletin is also published containing a short review of economic developments. These reports are important to watch, as they may contain information on changes in the SNB's assessment of the current domestic situation.
Important Characteristics of the Swiss Franc
Safe Haven Status
Switzerland's safe haven status is continually stressed because this and the secrecy of the banking system are the key advantages of Switzerland. The Swiss franc moves primarily on external events rather than domestic economic conditions. That is, as mentioned earlier, due to its political neutrality, the franc is considered the world's premier safe haven currency. Therefore, in times of global instability and/or uncertainty, investors tend to be more concerned with capital retention than appreciation. At such times, funds will flow into Switzerland, which would cause the Swiss franc to appreciate.
Swiss Franc is correlated with gold
Switzerland is the world's fourth largest official holder of gold. This is due to the fact that the Swiss constitution use to have a mandate requiring the currency to be backed 40% with gold reserves. This link remains in the minds of Swiss investors. As a result, the Swiss franc has close to an 80% positive correlation with gold. Therefore if the gold price appreciates, the Swiss franc has a high likelihood of appreciating as well. In addition, since gold is also viewed as the ultimate safe haven form of money, both gold and the Swiss franc should continue to benefit as global economic and geopolitical uncertainty continues.
Carry trades effects
The popularity of carry trades has increased in recent years, as investors are actively seeking high yielding assets. With CHF having one of the lowest interest rates of all industrialized countries, it is one of the primary currencies sold or "borrowed" in carry trades.
Interest rate differentials between Euro Swiss futures and foreign interest rate futures are closely followed
Interest rate differentials are good indicators of potential money flows as they indicate how much yield premium US fixed income assets are offering over Swiss fixed income assets, or vice versa. This differential provides traders with indications of potential currency movements, as investors are always looking for assets with the highest yields.
Potential changes in banking regulations negatively weigh on CHF
The EU has recently been putting significant pressure on Switzerland to relax the confidentiality of their banking system and to increase transparency of their customers' accounts. Switzerland is currently grappling with this issue because the confidentiality of their customers' accounts is the core strength of their banking system. Any news or talk of changing banking regulations will impact likely both Switzerland's economy and the Swiss franc.
Mergers and acquisitions are common in Switzerland's banking and insurance sectors
Switzerland's primary industry is banking and finance. In this industry, merger and acquisition activities (M&A) are very common, especially with the recent consolidation in the overall industry. These M&A activities can have significant impact on CHF spot prices. If foreign firms purchase Swiss banks or insurance companies, they will need to buy CHF and sell their local currency. If Swiss banks purchase foreign firms, they will need to sell CHF and buy the foreign currency.
Cross currency characteristics - EUR/CHF versus USD/CHF
The EUR/CHF is the most commonly traded currency for traders who want to participate in CHF movements. The USD/CHF has higher illiquidity and volatility. However, day traders may tend to favor USD/CHF over EUR/CHF because of its volatile movements. In actuality, the USD/CHF is only a synthetic currency derived from EUR/USD and EUR/CHF. Market makers or professional traders tend to use those pairs as leading indicators for trading USD/CHF or to price the current USD/CHF level when the currency pair is illiquid. Theoretically, the USD/CHF rate should be exactly equal to EUR/CHF divided by EUR/USD. Only during times of severe global risk aversion, like 9/11, will the USD/CHF develop a market of its own. Regardless, any small differences in these rates are quickly exploited by market participants.
Important Economic Indicators for Switzerland
Consumer Price Index (CPI)
Gross Domestic Product (GDP)
Balance of Payments
M3
Unemployment
Production Index (Industrial Production)
Сложи две вертикални графики една до друга на usd/bgn r i usd/chf и сам прецени !
УСПЕХ!Switzerland
Economic Overview
Switzerland is the 19th largest economy in the world, with GDP valued at over US$240Bln in 2001. The economy is relatively small, but it is one of the wealthiest in the world on a GDP per capita basis. The confidentiality offered by the Swiss banking system, coupled with the country's lengthy history of political neutrality has created a "safe haven" reputation for the country and its currency. As a result, Switzerland is the world's largest destination for offshore capital. The country holds over US$2Trl in offshore assets and is estimated to attract over 35% of the world's private wealth management business. This has created a large and highly advanced banking and insurance industry that employs over 50% of the population and comprises over 70% of total GDP. Since Switzerland's financial industry thrives on its safe haven status and renowned confidentiality, capital flows tend to drive the economy during times of global risk aversion, while trade flows drive the economy during a risk-seeking environment. Therefore trade flows are important, with nearly two thirds of all trade conducted with Europe.
Monetary & Fiscal Policy Makers
The Swiss National Bank (SNB) is the monetary policy authority of Switzerland. All decisions are based on a consensus vote. The Board reviews monetary policy at least once a quarter, but decisions on monetary policy can be made and announced at any point in time. Unlike most other central banks, the SNB does not set one official interest rate target, but instead sets a target range for their three month Swiss Libor rate. The Swiss Libor rate is set based upon the need for maintaining an inflation target of less than 2% inflation per year.
The SNB also closely monitors exchange rates, as excessive strength in the Swiss franc can cause inflationary conditions. This is especially true in environments of global risk aversion, as capital flows into Switzerland increases significantly during those times. As a result, the SNB typically favors a weak franc, and is not hesitant to use intervention as liquidity tool. SNB officials intervene in the franc using a variety of methods including verbal remarks on liquidity, money supply and the currency.
The most commonly used tools by the SNB to implement monetary policy include the following:
Target Interest Rate Range: The SNB implements monetary policy by setting a target range for their three-month interest rate (the Swiss Libor rate). This range typically has a 100 basis point spread, and is revised at least once every quarter. This rate is used as their target because it is the most important money market rate for Swiss franc investments. Changes to this target are accompanied with a clear explanation in regards to the changes in the economic environment.
Open Market Operations: Repo transactions are the SNB's major monetary policy instrument. A repo transaction involves a cash taker (borrower) selling securities to a cash provider (lender), while agreeing to repurchase the securities of the same type and quantity at a later date. This structure is similar to a secured loan, whereby the cash taker must pay the cash provider interest. These repo transactions tend to have very short maturities ranging from one day to a few weeks. The SNB uses these repo transactions to manipulate undesirable moves in the three month Libor rate. To prevent increases in the three month Libor rate above the SNB's target, the bank would supply the commercial banks with additional liquidity through repo transactions at lower repo rates, and in essence create additional liquidity. Conversely, the SNB can reduce liquidity or induce increases in the three month Libor rate by increasing repo rates.
The SNB publishes a Quarterly Bulletin with a detailed assessment of the current state of the economy and a review of monetary policy. A Monthly Bulletin is also published containing a short review of economic developments. These reports are important to watch, as they may contain information on changes in the SNB's assessment of the current domestic situation.
Important Characteristics of the Swiss Franc
Safe Haven Status
Switzerland's safe haven status is continually stressed because this and the secrecy of the banking system are the key advantages of Switzerland. The Swiss franc moves primarily on external events rather than domestic economic conditions. That is, as mentioned earlier, due to its political neutrality, the franc is considered the world's premier safe haven currency. Therefore, in times of global instability and/or uncertainty, investors tend to be more concerned with capital retention than appreciation. At such times, funds will flow into Switzerland, which would cause the Swiss franc to appreciate.
Swiss Franc is correlated with gold
Switzerland is the world's fourth largest official holder of gold. This is due to the fact that the Swiss constitution use to have a mandate requiring the currency to be backed 40% with gold reserves. This link remains in the minds of Swiss investors. As a result, the Swiss franc has close to an 80% positive correlation with gold. Therefore if the gold price appreciates, the Swiss franc has a high likelihood of appreciating as well. In addition, since gold is also viewed as the ultimate safe haven form of money, both gold and the Swiss franc should continue to benefit as global economic and geopolitical uncertainty continues.
Carry trades effects
The popularity of carry trades has increased in recent years, as investors are actively seeking high yielding assets. With CHF having one of the lowest interest rates of all industrialized countries, it is one of the primary currencies sold or "borrowed" in carry trades.
Interest rate differentials between Euro Swiss futures and foreign interest rate futures are closely followed
Interest rate differentials are good indicators of potential money flows as they indicate how much yield premium US fixed income assets are offering over Swiss fixed income assets, or vice versa. This differential provides traders with indications of potential currency movements, as investors are always looking for assets with the highest yields.
Potential changes in banking regulations negatively weigh on CHF
The EU has recently been putting significant pressure on Switzerland to relax the confidentiality of their banking system and to increase transparency of their customers' accounts. Switzerland is currently grappling with this issue because the confidentiality of their customers' accounts is the core strength of their banking system. Any news or talk of changing banking regulations will impact likely both Switzerland's economy and the Swiss franc.
Mergers and acquisitions are common in Switzerland's banking and insurance sectors
Switzerland's primary industry is banking and finance. In this industry, merger and acquisition activities (M&A) are very common, especially with the recent consolidation in the overall industry. These M&A activities can have significant impact on CHF spot prices. If foreign firms purchase Swiss banks or insurance companies, they will need to buy CHF and sell their local currency. If Swiss banks purchase foreign firms, they will need to sell CHF and buy the foreign currency.
Cross currency characteristics - EUR/CHF versus USD/CHF
The EUR/CHF is the most commonly traded currency for traders who want to participate in CHF movements. The USD/CHF has higher illiquidity and volatility. However, day traders may tend to favor USD/CHF over EUR/CHF because of its volatile movements. In actuality, the USD/CHF is only a synthetic currency derived from EUR/USD and EUR/CHF. Market makers or professional traders tend to use those pairs as leading indicators for trading USD/CHF or to price the current USD/CHF level when the currency pair is illiquid. Theoretically, the USD/CHF rate should be exactly equal to EUR/CHF divided by EUR/USD. Only during times of severe global risk aversion, like 9/11, will the USD/CHF develop a market of its own. Regardless, any small differences in these rates are quickly exploited by market participants.
Important Economic Indicators for Switzerland
Consumer Price Index (CPI)
Gross Domestic Product (GDP)
Balance of Payments
M3
Unemployment
Production Index (Industrial Production)
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