Down to the mid-1.2030s as there has been no confirmation of the rumored Swiss tax on franc-denominated deposits.
Whether or not a tax comes to fruition, hats off to whoever dreamed up the rumor. It is so plausible that if you’re short EUR/CHF, you can’t just blow it off.
One can understand why Switzerland would be reluctant to put such a tax in place. It would be a form of capital controls, like those seen in emerging markets. As a country with a very large financial services industry, the last thing it wants to do is employ a “third-world” strategy to protect itself in the short-run only to endanger its reputation as a free-market haven.
But as a small economy overwhelmed by events beyond its control, it may have to take drastic steps to protect the domestic economy. If they do impose a tax, we can assume that the SNB has amassed a huge amount of EUR/CHF in keeping the 1.20 floor intact and is growing uncomfortable with the risks.
If no measures are taken and hot-money players now long, risk is the SNB will soon be buying billions more euros if nothing transpires on the tax front. Traders estimate EUR 4.5 bln went through in EUR/CHF since the spike.
