The dollar’s rapid rise against the Japanese yen & other currencies has led to fresh suggestions that governments may intervene. USDJPY charges over 12% in five weeks, pushing to 20-year highs, intervention expectations have grown forbes johnkicklighter
The Swiss Experience
The Swiss National Bank has a history of direct intervention. For approximately three years up until January 15, 2015, the SNB’s principal objective was to keep the EURCHF exchange rate above 1.2000. On that date, the Swiss National Bank announced it was no longer actively keeping the Swiss Franc from appreciating further vs. the Euro. The market for the otherwise very liquid exchange rate ‘greyed out’ without a clear market value.
Now, we find once again the EURCHF exchange rate below 1.0500 – the zone where the pair traded back in 2015 after the policy collapse. Central bank members continue to voice a belief that the Franc is deviating from fundamentals, but the market pays little heed. The rub is that even if the SNB wanted to intervene, it would likely have limited effect against a much larger currency.