SNB Sight Deposits Rose Last Week Yielding Clue to Interventions
Nov. 24 (Bloomberg) — Sight deposits at the Swiss National Bank rose last week in sign it may have intervened to defend its currency cap.
The average of sight deposits of domestic banks at the SNB rose to 320.7 billion Swiss francs ($331 billion) in the week ending Nov. 21, from 315.7 billion francs a week earlier, according to a statement on its website today. Sight deposits are cash-like deposits that commercial banks hold with the central bank. In the past, when the SNB intervene to defend its currency cap, lenders’ deposits at the central bank were credited with the amount of francs sold.
The Swiss currency hit a 26-month high versus the euro last week as investors bet the European Central Bank would enact more stimulus to boost inflation. The SNB set a ceiling of 1.20 francs per euro three years ago amid Europe’s sovereign debt crisis, using currency interventions to defend it. The franc’s strength last week led to speculation the SNB may have purchased euros after a two-year hiatus.
“Given what we’re seeing with the ECB, a much bigger wave of Swiss buying by euro-denominated investors is on the horizon,” said Peter Rosenstreich, head of market strategy at Swissquote in Gland, Switzerland.
SNB spokeswoman Silvia Oppliger declined to comment on whether it had started interventions again. History shows that it may take its time to communicate any actions: When it stopped buying currency to defend the franc in September 2012, it waited 13 months to inform the public.
Gold Vote
Adding to pressure on the franc is a Nov. 30 referendum in Switzerland to require the central bank to hold at least 20 percent of its assets in gold and never sell any. SNB policy makers have termed the measure “dangerous,” saying it would make it harder for them to fulfill their price stability mandate.
According to a poll published by gfs.bern last week, 38 percent of voters backed the measure, while 47 percent are opposed it, with 15 percent still undecided.
The ECB took its deposit rate negative in June to boost inflation. SNB policy makers have said negative interest rates are in their toolkit and have said they are prepared to take measures to supplement their cap on the franc “immediately,” if needed.
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 Zoe Schneeweiss, Paul Gordon
