Central Bank

In the good old days investors could keep their portfolios balanced with 60% in bonds and 40% in stocks

Following its latest quarterly policy meeting, the Swiss National Bank (SNB) made no changes in interest rates and it kept its target range for three-month Swiss franc Libor at -1.25% to -0.25% and the rate it charges on sight deposits at -0.75%.

Consensus forecasts were for an unchanged policy, although there had been some speculation that a shift could be sanctioned with a further rate cut. The SNB reiterated that the franc is still significantly overvalued and that it would remain active in the foreign exchange market as necessary.

The Swiss National Bank reported a profit in 2016, the annual results showed Monday. A profit of CHF 24.5 billion was recorded in 2016 compared to a loss of CHF 23.3 billion in 2015.
The profit on foreign currency positions totaled CHF 19.4 billion. A valuation gain of CHF 3.9 billion was registered on gold holdings and a profit of CHF 1.6 billion on Swiss franc positions.

The Swiss central bank sought on Monday to allay fears among citizens that bank notes could eventually be phased out as a result of global money-laundering rules or the rise of alternative payments systems.

Among other benefits over cashless payments, cash provides "more effective budget control" and can be used without any technical know-how, while it also offers a comprehensive protection with regard to financial privacy, SNB’s deputy head Fritz Zurbruegg said.

It has been speculated for some time that Switzerland may have to do away with cash, especially high value banknotes, to get rid of its tag of being an alleged ‘safe haven’ for black money stashed by foreigners.

“Buy low, sell high” is what investors would like to do, but many “Sell low, buy high”, which is what they should not do. This Newsletter recently recommended selling as opposed to buying. The last week has seen even higher highs in the US markets.

The amount of cash kept with the Swiss central bank jumped last week, data on Monday showed, suggesting it intervened to weaken a franc currency buoyed by political risks in France and renewed worries about Greece’s public finances.

Since Donald Trump’s surprise U.S. presidential election victory on November 18, the 4.458 billion franc increase in sight deposits was the biggest
Sight deposits – cash that commercial banks hold with the Swiss National Bank, and seen as a guide to its currency market interventions – rose to 543.458 billion Swiss francs ($541.62 billion) from 539 billion francs a week earlier.

The foreign exchange reserves held by the Swiss National Bank (SNB) fell slightly in January, down from 1.6 billion to 643.7 billion, compared with the December figure of 645.3 billion. This is the second consecutive decline, after eight months on the rise.

The set of reserves, excluding gold, increased 651.1 bn to 649.4 bn swiss francs, as the institute said today.

In December, foreign exchange reserves had contracted in a similar manner, to 2.4 billion. Also last February the reserves recorded a decline (-4 billion), while in the other months of 2016 there had been an increase, even double-digit in January (+16 billion), April (+11), May (+14) , August (+11) and November (+18).

The Swiss franc’s high value continues to have a negative effect on the confederation’s economy, especially compared to the euro quoted an expert as reporting on Monday.

Andrea Maechler, one of the three members of the Swiss National Bank’s (SNB) governing board, told Swiss newspaper Tribune de Geneve that in addition to the currency valuation, other factors including interest rates, changes in prices and the global situation must also be taken into account when assessing the confederation’s economic outlook.
“It’s clear that the strong Swiss franc remains a big challenge for many businesses in Switzerland,” Maechler told in the interview.