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Containing Brexit


Swiss central bank accelerates intervention




The Swiss National Bank (SNB) has posted the first data on how it is intervening to contain the post-Brexit fallout on the franc. Sight deposits – assets parked at the central bank by domestic banks – have broken the CHF500 billion ($513 billion) mark for the first time.

Foreign exchange markets opened amidst great volatility on Friday as it emerged that Britain had voted to leave the European Union. The franc, which had been trading in a band of CHF1.08 to CHF1.11, plunged to CHF1.06 before stabilising. The British pound fell from around CHF1.40 to under CHF1.30.

The SNB, which had teams in place all through Thursday night to deal with such an event, confirmed on Friday that it was printing more money to buy up other currencies in order to stop the safe haven franc from appreciating too much.

Monday’s sight deposit data can be taken as a rough measuring stick of SNB intervention. One week after the SNB dramatically ended its defence of the euro-franc exchange rate peg in January 2015, sight deposits stood at CHF428 billion. The latest figure is just over CHF501 billion, up from CHF496 billion the week before.

Economists at Credit Suisse bank believe that the actual figure is certain to be higher as some data from Friday is yet to be captured. Credit Suisse is of the opinion that data to be delivered on July 4 will paint a truer picture of events.

Hildebrand criticises

Three days later, the SNB will publish its foreign currency reserves position for June. In May, these reserves reached a record CHF602 billion.

In early Monday trading, the euro-franc exchange rate was CHF1.075 while the British pound was trading at just under CHF1.30.

Meanwhile, former SNB chairman Philipp Hildebrand, who now works at United States investment fund BlackRock, has criticised the EU’s flawed economic policy. “We are experiencing a very sad, but also very important moment that Europe must realise cannot carry on,” he told the German Handelsblatt newspaper on Friday.

“If Europe fails to create confidence with a sustainable growth strategy, then the centrifugal forces will increase. Time is short.”

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