SZ News


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Wonder if our administration will go after them the way it is going after China for doing same.

Bad to buy dollars and US treasury securities vs your currency to support your exports — currency manipulation.

Good to buy dollars to buy treasury securities to, in the words of Secretary of State Clinton, enable the US to buy your products.

US policy could not be more confused and contradictory.

SNB Attention May Have ‘Shifted’ to Targeting Dollar, RBC Says

By Daniel Tilles

July 10 (Bloomberg) —The Swiss National Bank may target the franc’s appreciation against the dollar more than the euro, according to RBC Capital Markets.

“Since the SNB started intervening in March, euro-franc is up 2.2 percent, but dollar-franc is down over 9 percent,” Sue Trinh, a senior currency strategist in Sydney, wrote today in a report. “If the SNB’s attention has now shifted to dollar- franc, it would be consistent with the SNB’s change in tactics from intervening via euro-franc to dollar-franc in their most recent round of intervention and suggests dollar-franc may now be the better way to express the threat of SNB intervention at current levels.”

The dollar rose 0.5 percent to 1.0842 francs as of 8:10 a.m. in Zurich.

SNB to Maintain Currency Purchases, Roth Tells Handelsblatt

By Simone Meier

July 10 (Bloomberg) —The Swiss central bank will continue to buy foreign currencies if needed to weaken the franc and prevent deflation, President Jean-Pierre Roth told Handelsblatt.

“We stick to our policy in a decisive manner,” Roth told the newspaper in an interview published today. “We don’t announce an exchange-rate target but observe that the franc hasn’t appreciated further.”

While the Swiss National Bank is “relatively well prepared” to withdraw its stimulus measures, the bank is “still far away from a change in rate policy,” Roth said.

The Swiss economy could return to “slightly positive” growth rates in 2010 after shrinking between 2.5 percent and 3 percent this year, according to Roth. He called it a “good sign” that UBS AG, the country’s largest bank, managed to find private investors. “It shows that the market has regained confidence in the bank and that there’s light at the end of the tunnel,” Roth told Handelsblatt.


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SNB Not Pursuing ‘Beggar-Thy-Neighbor’ Policy, Roth Tells FT


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Looks like he’s been reading my blog.

It is a beggar thy neighbor policy, by definition.

SNB Not Pursuing ‘Beggar-Thy-Neighbor’ Policy, Roth Tells FT

by Simone Meier

Mar 17 (Bloomberg) — Swiss central bank President Jean- Pierre Roth said the bank is ready to stem further gains in the Swiss currency if needed, the Financial Times reported.


“We have clearly shown what our commitment is and the market has reacted accordingly,” Roth said, according to the FT. “We have a clear strategy.”

Roth said Switzerland “would be foolish, as a small and open economy, to try to gain competitiveness through the currency.” He said that it’s “not a beggar-thy-neighbor policy. It’s just to protect the Swiss economy from deflation.”


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Fed to lend in unlimited quantites to foreign CBs??? (Update1)


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This is hard to believe. Those CBs don’t have unlimited USD.

So, if true, they will be borrowing them from the Fed via an extension of Fed swap lines.

The FOMC has approved lines of $620 billion as last reported.

This is functionally unsecured lending to these CBs.

Repayment can only come from selling their own currencies for the needed USDs.

(or by somehow net exporting to the US or selling assets to the US which are hard to imagine.)

Somehow, this high risk, unsecured, ‘back door’ lending has remained under all radar screens.

And, if true, we will soon see the total USD funding need in the Eurozone.

Fed Says ECB, Others to Offer Unlimited Dollar Funds

by John Fraher and Simone Meier

Oct. 13 (Bloomberg) The U.S. Federal Reserve led an unprecedented push by central banks to flood financial markets with dollars, backing up government efforts to restore confidence in the banking system.

The ECB, the Bank of England and the Swiss central bank will offer unlimited dollar funds in auctions with maturities of seven days, 28 days and 84 days at a fixed interest rate, the Washington-based Fed said today. The Bank of Japan may introduce “similar measures.”


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ECB Mersch on inflation

ECB’s Mersch Says Oil Must Not Boost Other Prices

by Simone Meier

(Bloomberg) European Central Bank council member Yves Mersch said a surge in oil prices must not be allowed to lead to permanently faster inflation, Luxembourg’s Wort newspaper reported, citing an interview.

Yes, that is the mainstream view – don’t turn a relative value story into an inflation story.

“Of course we can do something against” faster inflation, Mersch, who is also governor of Luxembourg’s central bank, said in the interview, according to Wort. “We have to prevent temporary price increases, as we see with oil, from permanently impacting on the overall level of prices.”

It already has started to do this via biofuels and increased costs of production. Food prices are up, and other prices are facing upward pressure.

Rising oil prices are “like a tax,” Mersch told the newspaper. “If someone is taxing us, we all become poorer. If we refuse to become poorer, we’re not creating any purchasing power but only inflation,” the newspaper quoted him as saying.

Yes by keeping it a relative value story by limiting demand, real terms of trade deteriorate making the nation ‘poorer’.

“We have to watch out that other sectors and services don’t become infected” by rising prices, Mersch said, according to Wort.

Demand has to be kept low enough to not let a relative value story become an inflation story.