SNB

The Swiss National Bank stands ready to defend the franc with interest-rate cuts and market interventions if investors pile into the haven currency in response to the French elections, said SNB President Thomas Jordan said in an interview with Bloomberg Television.

“We hope that a reasonable candidate can win, somebody who is in favor of free markets, but we cannot exclude that there will be more pressure on the Swiss franc,” Jordan explained in Washington, on the sidelines of the International Monetary Fund spring meetings. “But as you know we also have our instruments to react to such a situation.”

With the reliability of a finely-tuned watch, the latest release of foreign-currency reserves held at the Swiss National Bank has shown yet another record, in a sign the central bank continues to swim against the tide. The foreign exchange reserves jumped by nearly 15 billion Swiss francs ($14.93 billion) in March.

The SNB held 683.181 billion francs worth of foreign currency at the end of March, compared with 668.332 billion francs in February, revised from an originally reported 668.18 billion, preliminary data calculated according to the standards of the International Monetary Fund showed.
The franc fell to about 1.07 francs to the euro after the data release, which followed news of U.S. missile strikes against an airbase in Syria that prompted inflows into assets considered safe havens.

Switzerland’s central bank bought another 67.1 billion Swiss francs ($67.6 billion) worth of foreign currencies in 2016, almost a quarter less than the previous year, in its effort to fight the appreciation of the safe-haven franc. The sum, published in the central bank’s annual report on Thursday, compares with a 2015 tally of 86.1 billion francs and a record of 188 billion spent in 2012.
"These interventions occurred mainly at times of heightened uncertainty, when the Swiss franc was particularly sought after as a safe investment," the Swiss National Bank said in its annual report published on Thursday.

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 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 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.

Switzerland’s central bank expects a 2016 full-year profit of 24 billion francs ($23.6 billion), it said on Monday; the results were largely down to foreign currency holdings built up to weaken the strong Swiss franc and its negative interest rate policy.

Profit from foreign currency positions amounted to more than CHF19 billion, the SNB added in the statement while a valuation gain of CHF3.9 billion was also recorded on gold holdings. Last year’s result is set to be the second-best in the last decade and follows a record loss for 2015.

The bank has built up foreign currency reserves by selling francs and buying foreign currency to weaken the franc, which it has consistently described as "significantly overvalued".

The government defended he Swiss National Bank’s (SNB) independence and rejected a number of proposals to reform Switzerland’s central bank.

"The SNB’s monetary policy concept has proved its worth also in difficult situations such as in the wake of the global financial crisis from 2007 to 2009," the cabinet said in a statement after a meeting.

The abandonment of the CHF1.20 peg to the euro in January 2015 saw the franc appreciate further against the euro at the expense of exporters and the Swiss tourism industry. This sparked a raft of parliamentary proposals to force the SNB to change course.