SNB intervention in Forex market?


8 June, AtoZForex – The latest report from the Swiss National Bank (SNB) showing the central bank’s foreign currency reserves has fueled speculation that the Central Bank is still intervening in the market in covert style. Suspicion of an SNB intervention in Forex market was apparent in the publication of foreign holdings in the first quarter of the year, the dollar accounted for a third of Swiss reserves, while the euro accounted for 42%.  With the aggregate reserves significantly higher than the previous month (602.1bn vs 587.6bn CHF). Putting the SNB’s reserves at a record high.

EURCHF range

Notably, the EURCHF pair has been ranging within the 1.10-1.11 boundaries since late April, and almost always above 1.09 since January. Further fuelling suspicion of intervention in the market by the Swiss National Bank (SNB).

Foreign reserve holdings

In terms of holdings, the euro and the dollar account for 75% of the SNB foreign reserves. While the Sterling and the yen equally combine for another 14% of the Switzerland's reserves. The remaining 11% of Switzerland's reserves are spread across a wide range of other currencies including the Canadian dollar, Australian dollar, Danish krone, Chinese yuan, Swedish krona, and Singapore dollar to account for about 8%. The Canadian dollar accounts for 3% share of Swiss reserves, leaving the Australian dollar, Danish krone, Chinese yuan, Swedish krona, and Singapore dollar to account for about 8%.

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SNB intervention in Forex market?

In may, the franc fell 3.4% against the dollar.  This alone accounts for almost half of the change in the franc-valued reserves (1.1% of the 2.4% increase).  The Swiss franc lost 0.6% against the euro in May, translating to another 0.25% increase in SNB reserves. Also, it is worthy of note that the Brexit fear is making the Swiss franc comparatively more attractive right now as pressure piles on the GBP and the EUR. A recent research by Morningstar found that almost half of the 62 European-domiciled funds that invest in companies globally reduced their exposure to UK equities in the 12-months through April, therefore weighing on the GBP. In conclusion, we like to think that the increase in Swiss reserves is as a result of valuation swings, rather than massive intervention.

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