My skepticism about the Swiss franc has been validated. You simply just can’t trust central bankers. Not even the Swiss variety.
The Swiss National Bank (SNB) surprised the currency market as it intervened by ‘injecting liquidity’ in an attempt to forestall the upsurge of the franc.
The SNB apparently went ahead of the Japanese who are mulling to do the same.
From the Marketwatch (bold emphasis mine)
The Swiss National Bank on Wednesday moved to halt the rise of the Swiss franc, saying the strength of the currency was "threatening the development of the economy and increasing the downside risks to price stability in Switzerland." The euro EURCHF +2.08% jumped 1.8% versus the Swiss currency to trade at 1.1061 francs, while the U.S. dollar USDCHF +1.80% jumped 1.4% to 77.61 centimes. Calling the franc "massively overvalued at present," the SNB said it would move its target for three-month Libor as close to zero as possible, narrowing the taret range to 0% to 0.25% from 0% to 0.75%.
The SNB said it will simultaneously "very significantly increase" the supply of liquidity to the Swiss franc money market over the next few days, and that it aims to expand banks' sight deposits at the SNB from around 30 billion Swiss francs to 80 billion Swiss francs. In a statement the central bank said it is "keeping a close watch on developments on the foreign exchange market and will take further measures against the strength of the Swiss franc if necessary."
Under such environment gold prices continue to streak at fresh record levels, which as of this writing has been drifting around the 1,665-1,670 range
from Kitco.com
I would suspect that part of this intervention, aside from publicly wishing for a weaker franc, is to flood the system with money to mitigate the losses being endured by European equity markets.
My guess is that the US will be next pretty soon.
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