The Swiss franc’s recent weakening against the euro is a positive development but the trend was “fragile”, Swiss National Bank governing board member Andrea Maechler said on Thursday.
“Overall, the trends are pointing in the right direction for the Swiss franc, but it is too early to say whether these trends are sustainable,” Maechler told an economic conference in Yverdon-Les-Bains.
Switzerland’s central bank on Monday reported a net profit of 1.2 billion Swiss francs for the first half of 2017 as big foreign exchange losses weighed on earnings from its foreign investments.
The Swiss National Bank made a profit of 100 million francs from its foreign currency positions, as exchange related losses of 11.8 billion francs almost wiped out the earnings from bonds and shares it holds.
The institution’s foreign currency investments have ballooned to 728 billion francs, 12% larger than the entire Swiss economy.
The Swiss National Bank’s foreign-exchange reserves, accumulated on a massive scale since 2012, dipped slightly last month to 693.5 billion Swiss francs ($721 billion), the SNB said Friday. The figures suggest the central bank has pulled back on its currency intervention efforts.
It was the second successive month, despite the central bank’s continued complaints about the effects of an “overvalued” franc.
The Swiss National Bank kept interest rates unchanged at record lows, citing the strong currency and an absence of price pressures and the SNB held its deposit rate at -0.75%. It also affirmed its commitment to wage currency market interventions and reiterated that the franc was “significantly overvalued.” Consensus forecasts were for an unchanged policy.
The Swiss National Bank (SNB) will maintain its ultra-loose monetary policy to help rein in the strong franc, Chairman Thomas Jordan Swiss told Italian-language newspaper Corriere del Ticino, published on Thursday.
"The overvalued franc, the underutilisation of production capacity and low inflation make it necessary for us to stick to our expansive monetary policy," Jordan said.
Jordan said "The franc is still overvalued, which is why negative interest rates and our readiness to intervene in the forex market remain necessary," he explained.
The Swiss National Bank’s (SNB) policy of negative interest rates is not ideal but is nevertheless necessary in order to weaken Switzerland’s "significantly overvalued" currency, Chairman Thomas Jordan said on the sidelines of the Private Banking Day in Zurich on Thursday. "It’s not the case that we find it great to have negative interest rates," Jordan said during conference.
However, Jordan said negative interest rates, along with the central bank’s willingness to intervene in the currency were absolutely necessary in order to protect exporters from a stronger Swiss franc, which is a safe-haven currency in times of market stress. Those conditions will largely be dictated from abroad, particularly by the European Central Bank (ECB). He stressed Swiss monetary policy was a hostage to weak economic conditions in some EU states, which prompted the ECB to print trillions of euros and move euro interest rates into negative territory.
The Swiss National Bank unveiled the second note in its new banknote series on Wednesday. The new 20 franc note, which will be in circulation from May 17th, follows the release of the first in the series, the 50 franc note, last year.
Overall, the National Bank’s new series of banknotes is intended to reflect “the many facets of Switzerland”. The design of each note centers around a primary theme. On the 20-franc note, this will be light. A hand, the earth and butterflies are the main motifs on the note.
Switzerland’s central bank posted a profit of 7.9 billion Swiss francs ($7.95 billion) in the first quarter, it said Thursday, boosted by gains from the huge foreign currency reserves built up during its long campaign to weaken the Swiss franc.
The Swiss National Bank made a profit of 5.3 billion francs on its foreign currency holdings that rose to 683.18 billion francs at the end of March, a figure larger than Swiss GDP. The bank also made a profit of 2.2 billion francs from a valuation gain on the gold it holds, and 466.4 million francs from negative interest rates it has charged on the sight deposit accounts it holds for commercial banks. The SNB is not required to make a profit, with its main mandate to ensure price stability in Switzerland defined as annual inflation of under 2 percent. But a portion of any profit it does make is distributed to the Swiss government and the country’s 26 cantons.
