SNB Sticks With Interventions to Combat Highly Valued Franc

The Swiss National Bank is on alert and ready to “intervene more strongly”after an intense battle earlier this year in response to the franc’s advance to a five-year high against the euro.

SNB President Thomas Jordan and his colleagues said the currency is “highly valued,” as they left the policy rate and deposit rate unchanged at a record-low -0.75%. They also announced they will publish details of their interventions more regularly, a possible move to head off the U.S., which has been critical of its currency market activity.

Switzerland’s dual tack of negative rates and interventions is now in its sixth year, as officials try to prevent inflows of capital that push up the franc and increase deflationary risks. The SNB faced a tough battle in the first half of 2020, though the currency has eased somewhat in recent months, thanks in part to the European Union’s historic spending package.

“No surprises — the most important elements remained unchanged — also the wording,” said UBS Group AG economist Alessandro Bee.

The franc slipped a touch against the euro following the policy decision and was trading at 1.0780 per euro at 9:51 a.m. in Zurich.

The currency remains vulnerable to a number of risks, including Brexit and the U.S. presidential election. Also hanging over Switzerland is a U.S. Treasury report that could classify the country as a currency manipulator, potentially inviting speculators to test the SNB’s resolve to intervene. The SNB will start publishing intervention data quarterly, rather than just provide a once-a-year update.

This is big! Likely as US administration has pushed Switzerland into greater FX transparency

GIF9:49 AM · Sep 24, 2020


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While the central bank stepped up currency action and boosted the supply of liquidity to the market in response to the Covid-19 outbreak, it hasn’t followed the Federal Reserve and others by cutting interest rates.

Swiss rates are already far below zero, though Jordan has said in the past that the SNB can take them lower if needed. Such a move wouldn’t go down well with banks, who’ve long complained about them.

As with economies everywhere, the coronavirus outbreak has pushed Switzerland into its deepest slump in years. The central bank now sees the economy contracting around 5% this year, compared with a June forecast of about 6%.

The SNB also said consumer prices will fall 0.6% this year and only barely increase in the 2021 and 2022.

— With assistance by Paul Gordon, Brian Swint, Zoe Schneeweiss, Leonard Kehnscherper, Wout Vergauwen, Claudia Maedler, and Craig Stirling

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