Swiss Currency Reserve Rise Provides a Clue to Interventions

(Bloomberg) --

The Swiss National Bank’s holdings of foreign currency increased last month, adding to signs it had intervened in the foreign exchange market to curb the franc’s strength.

The central bank’s hoard totaled 768 billion francs ($787 billion) in July, a gain of 1.1% from the month before, data published on Wednesday showed.

According to the most recent figures available, nearly 40% of the SNB’s reserves were in euros and slightly less in dollars, with additional holdings of pounds, yen and other currencies. While the franc rallied to a two-year high against the euro in July, it lost ground against the dollar, and shifts in the exchange rate are probably behind some of the increase.

Yet data on sight deposits, which economists scrutinize for clues about interventions, rose in late July and the Swiss currency weakened following the European Central Bank’s policy announcement on the 25th, an indication the SNB may have been in the market.

“In sum, I think there is a bit of depreciation of the franc, when you look at it as it’s weighted in the reserves, but also a bit of interventions,” said Maxime Botteron, an economist at Credit Suisse Group AG.

A spokesman for the SNB declined to comment.

The SNB’s monetary policy consist of a deposit rate of minus 0.75% plus a pledge to intervene in currency markets, if needed, to tame the franc’s strength. If the ECB cuts interest rates to stave off the effects of trade tensions and Brexit, the SNB could decide to step up interventions or slash rates too.

To contact the reporter on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Jan Dahinten

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