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Forex Flash: Real CHF flows remain very strong - Nomura

FXstreet.com (Barcelona) - Nomura Strategist Geoffrey Kendrick notes that detailed data released by the SNB today showed continued buying of CHF related to bank flows, on both sides of their balance sheet.

He adds, “Indeed, these data showed that for both January and February non-resident deposits in Swiss banks in CHF continued to increase (to now reach CHF136bn since the start of 2008).” Further, he notes that CHF lending outside of Switzerland remained weak, falling a further CHF5bn in February to be down CHF 15bn since the start of 2008 (this is due to continued shrinkage of Swiss bank balance sheets). He sees that the combined growing total (CHF 151bln) is the first reason CHF remains strong.

Kendrick continues, commenting that a rise in “foreign liabilities in CHF” means more non-resident deposits in CHF (CHF buying). A decline in “foreign assets in CHF” means less loaning of CHF outside Switzerland (less CHF selling). A wedge between these two series means CHF buying. The second reason the Swiss franc remains strong is the continued CHF10bn a month current account surplus. He finishes by writing , “We use monthly trade data (goods only) and estimates for the more stable items of the Swiss balance of payments in Figure 2 to estimate total flows in CHF for Q2. The net bank flow point above appears as +CHF16bn net commercial bank lending. In summary we estimate a positive basic balance of CHF33bn in Q2, and expect EUR/CHF to remain close to the floor for some time.”

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