Swiss CB continues to tame franc
ZURICH: The Swiss National Bank appeared to be buying foreign currency again last week as escalating trade tensions pushed the value of the safe-haven Swiss franc higher against the euro.
Sight deposits, a proxy for the central bank’s currency interventions, rose by 1.6 billion francs to 582.7 billion francs ($598 billion) in the week ending Aug. 2, according to data published on Monday.
The increase, coming on top of a 1.7 billion franc rise the week before, seemed to show the Swiss National Bank (SNB) had continued its foreign currency purchases to stabilise the franc, analysts said.
The franc breached the 1.09 level versus the euro on Monday as expectations of monetary easing in both the eurozone and the United States and the escalating Sino-us trade war made investors nervous.
Meanwhile Japan signalled it was ready to intervene in the currency market if excessive gains by the yen, another traditional safe harbour, threatened to hurt its export-reliant “The SNB are definitely in the market,” said Karsten Junius, chief economist at J.safra Sarasin, who expects the central bank to step up its interventions in the coming weeks.
“1.08 used to be a level the SNB defended, so we expect there will be more foreign currency purchases to defend that, and also at 1.05.”
He expects SNB Chairman Thomas Jordan to delay cuting the SNB’S -0.75 per cent interest rate until the European Central Bank meets on Sept. 12, when the eurozone central bank is expected to cut its interest rates.
The SNB declined to comment on Monday on the sight deposit increase. The franc has risen 3.5 per cent against the euro this year, making life tougher for Switzerland’s exporters.
Antje Praefcke, senior FX strategist at Commerzbank, said currency interventions were the SNB’S only option at the moment, even if it meant expanding its already massive balance sheet which stood at 835 billion francs.