, On Tuesday August 9, 2011, 11:39 am EDT
The Swiss Franc’s meteoric rise against the Euro and US Dollar has left the Swiss National Bank on the defensive, and the currency’s latest moves make it exceedingly expensive to hold CHF long positions for the forex trader. The Swiss Franc’s meteoric rise against the Euro and US Dollar has left the Swiss National Bank on the defensive, and the currency’s latest moves make it exceedingly expensive to hold CHF long positions for the forex trader.
On August 3 at approximately 07:00 GMT, the Swiss National Bank announced that it would cut its short-term interest rate to as close to zero as possible—effectively making it far more expensive to hold Swiss Franc positions.
Indeed, overnight interest rates have recently fallen near record lows. At 0.035%, the current overnight yield is effectively at zero and makes the currency a far less attractive long against much higher-yielding counterparts.
Holding Swiss Franc long positions is not only expensive, but the threat of SNB intervention makes it exceedingly risky through short-term trading.
