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Now that the BoJ has intervened to depress the yen, how about the other strongman of the global currency community.Here’s a quick note from Morgan Stanley:
We have decided to take profit in short EUR/CHF
after the big move lower in recent weeks at 1.3025 (the 3:30am NY Bloomberg fix). We have been bullish CHF since October 22 last year and while the fundamentals in Switzerland are still very good, we think that the risk/reward has deteriorated now that the CHF is so strong on a trade-weighted basis.
Following the Japanese interventions overnight, we are concerned that the SNB might also view the
trade-weighted level of the CHF as being too strong, especially in an environment where risk is trading
well. We will look for better levels to sell EUR/CHF if it corrects towards 1.40.
The funny thing is, yesterday there was chatter, via UBS, that the SNB might actually raise a key interest rate to fight inflation, which would have the opposite effect.
Between the BoJ though, the SNB, and next week the FOMC, it’s an exciting time for the currency markets.
The same can’t be said, though, for snoozy equities, which nobody cares about anymore.