Speculators Bet on Swiss Franc Cap Despite No vote on Referendum

Currency speculators are still betting that a three-year old Swiss franc currency cap will be breached, despite polls showing that a vote to require the Swiss National Bank to load up on gold will fail.

That is because even if the Nov. 30 gold initiative is voted down, the risk that the European Central Bank could resort to asset purchases and drive the euro lower is still giving speculators courage to put on bets favouring a stronger franc.

The referendum, if passed, would force the SNB to hold 20 percent of its reserves in gold, making it harder defend the cap by impeding its flexibility to conduct policy.

Partly as a result, the franc has risen to a 26-month high against the euro of 1.2009 per euro, bringing it close the SNB’s of 1.20 francs per euro, imposed to protect Switzerland from having to live with an overvalued currency.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza