The curse of being a safe haven currency

It's tough being a low-yielding safe haven currency. In good times, nobody wants you and you are used for carry trades. In bad times, you're highly sought after and your value seems completely decoupled from your economy.

Such is the fate of the Swiss franc. The Swiss National Bank must feel like it's Groundhog Day. Four years ago, as the Greek crisis heated up and everyone feared an imminent break-up of the euro zone, the SNB took radical action by pegging the Swiss franc against the euro. That worked beautifully for more than three years. Until the European Central Bank signaled it was going to embark on a massive round of bond-buying and the peg was no longer tenable.

A Swiss franc and euro banknotes
Dado Ruvic | Reuters
A Swiss franc and euro banknotes

You know the rest of the story: Shock de-peg by the SNB on January 15th. Year-to-date, the Swiss franc has gained some 15 percent against the euro and that has left a big dent in the country's growth dynamics, exports and price levels. In the first quarter, the economy shrank 0.2 percent and exports suffered greatly.

And now, the Greek crisis is back with a vengeance (not that it was ever fully contained) and the Swissie is seeing increased safe-haven flows again.

Read MoreScrapping cap didn't harm credibility: SNB Chair

So what choices does the SNB have to lower the attractiveness of its currency?

Very few - according to analysts.

Bank of America Merrill Lynch writes: "The SNB's policy options are dwindling, given the size of its balance sheets, even if Q1 GDP and CPI may have raised the possibility of a response." Meanwhile, Credit Suisse analysts add: "With interest rates already negative, monetary policy is very limited"

True, the SNB could lower its benchmark rate even further into negative territory (the three-month Libor target is currently -0.75 percent, a record low), or increase the number of banks required to pay negative interest rates on sights deposits, which it did in June. But both measures are expected to have marginal effectiveness.

A man looks at a board showing currency exchange rates in Bern January 15, 2015.
Thomas Hodel | Reuters
A man looks at a board showing currency exchange rates in Bern January 15, 2015.

According to Peter Rosenstreich, chief foreign exchange analyst at Swissquote Bank, lower interest rates "will have limited effect (and hurt Swiss savers), while FX interventions will only encourage the market to challenge the central banks and generate billions more in losses".

"More extreme measures such as capital controls will only be used as a last-ditch effort. We anticipate EUR/CHF to head back towards 1.0235 support as Greece slides towards default."

Meantime, analysts at Nomura believe further easing isn't necessarily warranted as "recent comments from SNB policymakers have made it clear that they view the recent developments in the data to be one-offs (...) And the EUR/CHF is only 1.5 percent lower than it was at the March meeting and recent CPI figures were in line"

Bottom line, it looks like the SNB's hands are pretty much tied and chairman Thomas Jordan and co will have to watch and wait what happens with Greece just like the rest of us.

That said - one thing we have learned over the last year when it comes to the SNB is - the surprise potential is enormous. So scrap my "SNB's hands are tied" comments. The SNB will do whatever it thinks it needs to do, ignoring analysts views.

Maybe that's the only way to handle the unruly safe haven currency that is the Swiss franc.

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