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SNB stands ready to intervene in significant size - Nomura

FXStreet (Bali) - Nomura FX Strategists think the SNB stands ready to intervene in significant size, with a six-month horizon to protect EUR/CHF cap seen as credible.

Key Quotes

"Incrementally easier monetary policy in the eurozone has been pushing EUR/CHF towards the 1.20 floor, and the Gold Referendum (30 November) and the ECB meeting (4 December) may put further appreciation pressures on the Swiss franc relative to the euro."

"We think the SNB stands ready to intervene in significant size, although we don‟t think the amounts comparable with the 2012 intervention will be needed in the near term. On a six-month horizon, we view the floor as credible, but SNB interest rate action may be required to avoid the need for more permanent FX intervention."

"In an environment of more permanent intervention, diversification flows may provide support to GBP and CAD on the margin and more unconventional reserve currencies (such as AUD or KRW) as we have seen from the SNB in the past."

"In terms of trading CHF it is clear that with the SNB floor to continue to remain in place CHF cannot appreciate much more from these levels against EUR. Therefore, we think the risk-reward trade is clearly to be long EUR/CHF, although the price action may remain around these levels as it was in mid- 2012, when the SNB were actively intervening. The SNB meeting on 11 December could prove to be a key CHF catalyst if it was to cut, but this depends on the ECB, where EUR/CHF is trading at the time and also perhaps the outcome of the Gold Referendum."

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