Swiss Franc at Euro Parity Suggests SNB Interventions Only Muted

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The Swiss franc hit parity with the euro on Monday, but data from the country’s central bank suggests policy makers may not be too concerned.

Sight deposit numbers for last week showed an increase of just 0.07% to 725.7 billion francs ($785 billion), suggesting the Swiss National Bank only intervened marginally to stop the appreciation of its currency against the euro.

“The increase is pretty muted, indicating that the the SNB hasn’t intervened much over the past few days,” Credit Suisse economist Maxime Botteron said by phone. “It has a lot to do with the fact that the franc’s appreciation is against the euro and not other currencies.”

Together with the world’s lowest interest rate, currency interventions are part of the SNB’s policy approach. While the central bank reiterated its willingness to intervene on Monday, it also highlighted that it “takes the overall currency situation into consideration” with individual currency pairs not playing a “special role.”

The franc surged about 1.2% against the euro last month, supported by haven flows following Russia’s invasion of Ukraine. In addition, the European Union’s high exposure to Russia’s economy has hurt the common currency.

The euro-franc pair has continued to plummet this month and hit parity in early trade Monday for the first time since the aftermath of the SNB’s removal of its cap on the franc’s value against the euro in 2015. It was trading at 1.0048 per euro at 10:57 a.m. in Zurich.

“For the SNB, it’s a difficult situation,” Botteron said. “A psychological level has been reached with franc/euro parity. On the other hand, the argument for monetary policy easing is not there due to the inflation outlook and the growth outlook which is quite good due to the reopening of the Swiss economy” after the omicron surge.

Earlier Monday, data showed the SNB’s foreign-currency reserves declined by 8.4 billion francs ($8.7 billion) to 938.3 billion francs in February. That’s likely because of the franc’s appreciation that month. 

The SNB declined to comment on the sight deposit or reserve numbers. 

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