SNB To Make Rates Negative (CHF)?
As I mentioned above, I hate trading currencies with active Central banks as sometimes their overzealous can produce unfavorable action for traders. The Swiss National Bank (SNB) is one such entity as they are constantly intervening in their currency, the Swiss franc (CHF).
The reason they do this is because they want a weaker currency to support their exports (as does just about everyone) as Switzerland is a big exporting nation relative to their size. They ahve also been the model of economic health in the EU for some time and as result are seen as a safe haven from the Euro.
The Euro debt crisis and yesterday’s bad GDP report have the Swiss on high alert that their currency strength may be hurting their overall economy and they risk falling into recession. So yesterday, a rumor was floated that they were considering moving interest rates to “negative”. What this essentially means is that you will lose money of your franc investments rather than gain. Essentially you would be paying them, not the other way around.
This caused the spike that you can see on the chart below, and would make the Swissie an unfavorable currency going forward.