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A more modest theme in the FX market has been the strength of the Swiss franc against the euro (~3% since mid-December).

Recall the quantitative easing strategy the SNB pursued included blocking CHF appreciation through intervention and the purchase of foreign (dollar and euro) bonds. The franc has appreciated through the top end of the range the SNB was perceived to be defending.

Indeed, on Thursday the franc was trading at its best level against the euro since the first intervention back in March 2009. Earlier in the day the SNB published its foreign currency holdings and both dollars and euro holdings increased, suggesting that QE has continued. Specifically, the SNB's euro holdings rose 5.3 billion euros to 37 billion and the dollar holdings rose by $7 billion to $27.6 billion.

While it is possible that the intervention was concentrated in the earlier part of Q4, it is also possible that the demand for Swiss francs is coming from eastern and central Europe, where mortgages and other loans were taken out in francs, as well as from the Swiss themselves who may be selling foreign assets to bolster domestic positions. There is little in the way of the euro to return toward last year's low near CHF1.46, without a stronger protest from Swiss officials.

Disclosure: No positions

Source: A Strong Swiss Franc, A Weak Euro