CHF: FX reserves show no intervention - Nomura

SNB FX reserves for July increased CHF20bn on the month, but after adjusting for FX valuation and asset returns our estimates show no sign of intervention, according to the research team at Nomura.

Key Quotes

“The Swiss franc only started to depreciate materially in the latter part of July, so this morning’s July CPI inflation outturn of 0.3% y-o-y shows only a small FX-related boost so far. The news cycle continues to provide mixed signals over SNB’s future policy with some calling for an end to the SNB’s negative rate policy, but it is too early for that in our view (source: Bloomberg).”

“EUR/CHF suffered its first sizeable intraday drawdown along this rally higher on Friday after healthy US nonfarm payrolls data put pressure on markets short USD and other consensus positions. But as this is not a risk-off-related move it is difficult to envisage sustained CHF strength if there is a stronger US economy and therefore higher foreign bond yields. We therefore expect some further EUR/CHF overshooting above our recently upgraded year-end target of 1.15 for the time being and remain long EUR/CHF, targeting 1.20 before or by the end of next year.”